EM Preview for the Week Ahead

The dollar was firmer against the majors but softer against EM FX last week. This divergence is unlikely to last. Which is giving the true signal? We believe the broad-based dollar rally remains intact due to our constructive view on the US economy. As such, we expect EM FX to resume weakening in the coming days.

China reports March money and loan data come out this week, but no date has been set. March CPI and PPI will be reported Thursday. The former is expected to rise 2.3% y/y and the latter by 0.4% y/y. March trade data is likely to come out Friday. Exports are expected to rise 7.7% y/y and imports are expected to contract -0.1% y/y.

Czech Republic reports February industrial and construction output as well as trade Monday. March CPI will be reported Wednesday, which is expected to rise 2.9% y/y vs. 2.7% in February. If so, it would be the highest since October 2017 and near the top of the 1-3% target range. Yet policymakers are growing concerned about slowing growth and so rates are likely on hold for now. Next policy meeting is May 2 and no change is expected then.

Hungary reports February trade Monday.   March CPI will be reported Tuesday, which is expected to rise 3.5% y/y vs. 3.1% in February. If so, inflation would be nearing the top of the 2-4% target range. Central bank minutes will be released Wednesday. Next policy meeting is April 30 and no change is expected then, as policymakers are more worried about sustaining growth than limiting inflation.

Taiwan reports March trade Monday. Exports are expected to contract -8.5% y/y and imports by -10.4% y/y. March CPI will be reported Tuesday, which is expected to rise 0.4% y/y vs. 0.23% in February. The central bank does not have an explicit inflation target but low price pressures should allow it to keep rates steady this year.

Chile reports March CPI Monday, which is expected to rise 1.9% y/y vs. 1.7% in February. The central bank just cut its 2019 growth and inflation forecasts. The bank now expects GDP growth between 3-4% this year, down from its previous forecast of 3.25-4.25%. Inflation is seen at 2.6% this year, down from 2.9% previously. The report supports the notion that the central bank is on hold for the time being. Next policy meeting is May 9 and no change is expected then. March trade will also be reported Monday.

Bank of Israel meets Monday and is expected to keep policy steady. CPI rose 1.2% y/y in March, matching the highest rate since July 2018 but still well within the 1-3% target range. Elections will be held Tuesday and polls suggest a tight race. March trade data will be reported Thursday.

Brazil reports February retail sales Tuesday, which are expected to rise 3.4% y/y vs. 1.9% in January. March IPCA inflation will be reported Wednesday, which is expected to rise 4.44% y/y vs. 3.89% in February. If so, this would be the highest rate since October but still within the 2.75-5.75% target range. Next COPOM meeting is May 8 and no change is expected then.

Mexico reports March CPI Tuesday, which is expected to rise 4.02% y/y vs. 3.94% in February. Next policy meeting is May 16 and no change is expected then. February IP will be reported Thursday, which is expected to contract -0.5% y/y vs. -0.9% in January. Banco de Mexico also releases its minutes Thursday.

Malaysia reports February IP and manufacturing sales Thursday. IP is expected to rise 2.3% y/y vs. 3.2% in January. The central bank does not have an explicit inflation target. However, low price pressures should allow it to keep rates steady this year. Next policy meeting is May 7 and no change is expected then.

Turkey reports February current account data Thursday, which is expected at -$90 mln. If so, the 12-month would drop sharply to -$17.97, the lowest since February 2010. The improvement in the external accounts is being driven by the deep recession. Other fundamentals remain weak, and rising inflation may force the central bank to tighten further at its next policy meeting April 25.

South Africa reports February manufacturing production Thursday, which is expected to rise 0.5% y/y vs. 0.3% in January. The economy remains sluggish, but the central bank cannot cut rates anytime soon as inflation picks up and the rand remains vulnerable. Next SARB meeting is May 23 and no change is expected then.

Peru central bank meets Thursday and is expected to keep rates steady at 2.75%. CPI rose 2.3% y/y in March, above the 2% target but well within the 1-3% target range. Given global uncertainties, we think the central bank will remain on hold until at least H2.

Singapore reports Q1 GDP Friday, with growth is expected at 1.5% y/y vs. 1.9% in Q4. The MAS typically meets the same day as the GDP report. While the MAS does not have an explicit inflation target, low price pressures and rising headwinds to growth should keep policy on hold this week. Singapore also reports February retail sales Friday, which are expected to rise 2.7% y/y vs. 7.6% in January.

India reports March CPI and February IP Friday. CPI rose 2.57% y/y in February, near the bottom of the 2-6% target range. The RBI just cut rates 25 bp but maintained its neutral bias. Next policy meeting is June 6 and if price pressures remain low, the bank may deliver its third cut in a row then.

Colombia reports February IP and retail sales Friday. The economy is facing some headwinds, while price pressures are restrained. CPI rose 3.21% in March, up from 3.01% in February but still well within the 2-4% target range. Next policy meeting is April 26 and no change is expected then.