EM Preview for the Week Ahead

EM is benefiting from the more benign global liquidity story. However, we do not think this is enough to sustain the rally. Global growth and trade remains at risk and so we are cautious about piling into EM right now.

Singapore reports May CPI Monday, which is expected to rise 0.6% y/y vs. 0.8% in April. While the MAS does not have an explicit inflation target, low price pressures should keep it on hold at the next semiannual policy meeting in October. May IP will be reported Wednesday and is expected to contract -1.7% y/y vs. +0.1% in April.

Poland reports May real retail sales Monday, which are expected to rise 6.9% y/y vs. 11.9% in April. June CPI will be reported Friday and is expected to remain steady at 2.4% y/y. If so, inflation would remain in the bottom half of the 1.5-3.5% target range. Next policy meeting is July 3 and no change is expected then.

Chile central bank minutes will be released Monday. At that meeting, the bank surprised markets with a 50 bp cut to 2.5%. The minutes will be studied for clues about further easing. Next policy meeting is July 18 and further easing is possible then. May IP will be reported Friday.

Mexico reports mid-June CPI Monday, which is expected to rise 4.03% y/y vs. 4.43% in mid-May. If so, inflation would be the lowest since March and nearing the 2-4% target range. Banco de Mexico meets Thursday and is expected to keep rates steady at 8.25%. Markets are looking for an easing cycle late this year, but much will depend on the peso and external conditions.

Brazil reports May current account and FDI data Monday. Mid-June IPCA inflation will be reported Tuesday and is expected to rise 3.85% y/y vs. 4.93% in mid-May. COPOM minutes will also be released Tuesday. Central government budget data for May will be reported Wednesday, followed by consolidated budget data Friday. The central bank releases its quarterly inflation report Thursday.

National Bank of Hungary meets Tuesday and is expected to keep rates steady at 0.9%. CPI rose 3.9% y/y in May, right at the top of the 2-4% target range. We expect some minor tightening measures, perhaps a hike in the overnight rate while keeping the policy rate steady. For now, the bank seems to be erring on the side of dovishness.

Malaysia reports May CPI Wednesday, which is expected to rise 0.3% y/y vs. 0.2% in April. While Bank Negara does not have an explicit inflation target, low price pressures should keep it on hold at the policy meeting July 9.

Bank of Thailand meets Wednesday and is expected to keep rates steady at 1.75%. Inflation was 1.2% y/y in May, near the bottom of the 1-4% target range. Meanwhile, the economy is facing downside risks from regional trade tensions. We expect the bank to keep rates on hold in 2019.

Czech National Bank meets Wednesday and is expected to keep rates steady at 2.0%. Inflation was 2.9% y/y in May, near the top of the 1-3% target range. However, the bank has expressed concern with growing headwinds to the economy. We expect steady rates in 2019.

Korea reports May IP Friday, which is expected to contract -1.0% y/y vs. -0.1% in April. Exports continue to contract due to regional trade tensions and dragging the overall economy down as well.

South Africa reports May money and private sector credit, trade, and budget data Friday. The economy remains weak, increasing the chances that the SARB will start an easing cycle soon. Next policy meeting is July 18 and we see chances of a rate cut then. Much will depend on the rand and external conditions.

Turkey reports May trade Friday. Politics takes center stage after opposition candidate Ekrem Imamoglu won the Istanbul mayoral vote. He increased his margin of victory to nearly 800,000 votes from the initial round, signaling problems ahead for President Erdogan. The knee-jerk reaction was to buy the lira, but we expect rising political tensions ahead and so remain skeptical of this recent rally.