EM Preview for the Week Ahead

EM FX ended a good week on a strong note, with virtually every currency up against the greenback. The FOMC is likely to send a very dovish message to the markets this week. While this should help EM gain, we note that risk assets generally did not do well after the January FOMC and March ECB meetings. We think that global growth concerns will become more of an issue in the coming days.

Singapore reports February trade data Monday. NODX are expected to contract -1.6% y/y vs. -10.1% in January. CPI rose only 0.4% y/y in January. While the MAS does not have an explicit inflation target, low price pressures and the soft economy should allow it to keep policy steady at its next semiannual policy meeting in April.

Chile reports Q4 GDP and current account data Monday. Growth is expected to pick up to 3.3% y/y from 2.8% in Q3, while the current account gap is expected to narrow to -$2.4 bln. CPI rose 1.8% y/y in January, below the 2-4% target range for the first time since April 2018. Next policy meeting is March 29 and rates are likely to be kept steady at 3.0%.

Poland reports January trade and current account data Monday. February IP will be reported Wednesday, which is expected to rise 4.8% y/y vs. 6.1% in January. February real retail sales and construction output will be reported Thursday and are expected to rise 5.4% y/y and 4.7% y/y, respectively. The economy is starting to show signs of slowing, which should keep rates on hold this year.

Bank of Thailand meets Wednesday and is expected to keep rates steady at 1.75%. CPI rose 0.7% y/y in February, below the 1-4% target range. Consensus sees the next hike coming late this year, but we think it will depend on how the data come in. If inflation remains low, a hike may not come until 2020.

South Africa reports February CPI and January retail sales Wednesday. Headline CPI is seen rising 4.1% y/y vs. 4.0% in January, while sales are seen rising 1.4% y/y vs. -1.4% in December. Inflation is within the 3-6% target now, but the recently announced hike in electricity prices will put upward pressure on CPI in April and beyond. Next policy meeting is March 28 and rates are likely to be kept steady at 6.75%.

Taiwan reports February export orders Wednesday, which are expected to contract -5.9% y/y vs. -6.0% in January. The central bank meets Thursday and is expected to keep rates steady at 1.375%. The economy remains sluggish, and so low price pressures should allow the bank to keep rates steady this year.

Brazil COPOM meets Wednesday and is expected to keep rates steady at 6.50%. IPCA inflation rose 3.9% y/y in February, well within the target range. Low price pressures and a weak economy have pushed out tightening expectations into 2020. Ahead of COPOM, President Bolsonaro visits the US and will meet his counterpart Trump Tuesday.

Korea reports trade data for the first 20 days of March Thursday. This will be the first snapshot of regional trade for March and there is unlikely to be any recovery soon. Next policy meeting is April 18 and rates are likely to be kept steady at 1.75%. With headwinds building and inflation below target, BOK will be in no hurry to hike again. Consensus sees the next hike coming around mid-2020.

Bank Indonesia meets Thursday and is expected to keep rates steady at 6.0%. CPI rose 2.6% y/y in February, near the bottom of the 2.5-4.5% target range. Consensus sees another hike coming in early 2020 but we think that if inflation remains low, the central bank will cut rates this year.

Philippine central bank meets Thursday and is expected to keep rates steady at 4.75%. CPI rose 3.8% y/y in February, back within the 2-4% target range. While incoming Governor Diokno has made his dovish stance known already, we think it would be a dangerous signal to cut rates at his first meeting.

Argentina reports Q4 GDP Thursday, which is expected to contract -6.4% y/y vs. -3.5% in Q3. The economy is in recession for the second time in Macri’s first term, making his path to reelection more difficult. The central bank has tightened policy aggressively this month to help stabilize the peso, with the LELIQ rate now nearly 64%. As such, there is unlikely to be any bounce in the economy until after the October elections.

Malaysia reports February CPI Friday, which is expected to fall -0.4% y/y vs. -0.7% in January. Next policy meeting is May 7 and rates are likely to be kept steady at 3.25%. While Bank Negara does not have an explicit inflation target, low price pressures should allow it to keep policy steady for the rest of the year.

Central Bank of Russia meets Friday and is expected to keep rates steady at 7.75%. CPI rose 5.2% y/y in February, the cycle high and above the 4% target for the third straight month. We see rates on hold until mid-year at least. Consensus sees the first cut coming in early 2020 but we think it will depend on external factors and the ruble.

Mexico reports mid-March CPI Friday, which is expected to rise 3.98% y/y. If so, inflation would remain within the 2-4% target range. Next policy meeting is March 28 and rates are likely to be kept steady at 8.25%. Consensus sees the first cut coming in early 2020 but we think it will depend on external factors and the peso.

Colombia central bank meets Friday and is expected to keep rates steady at 4.25%. CPI rose 3.2% y/y in February, well within the 2-4% target range. As such, we do not think the bank is in any hurry to hike rates. Consensus sees the first hike coming around mid-year, but we think it will depend on how the data come in for H1.