(from my colleague Dr. Win Thin)
EM FX ended last week on a
firm note, though most were still down for the week as a whole. Commodity
prices stabilized, but the balance remains fragile, in our view. We
remain cautious, especially with regards to the high beta currencies such as
BRL, MXN, TRY, and ZAR.
firm note, though most were still down for the week as a whole. Commodity
prices stabilized, but the balance remains fragile, in our view. We
remain cautious, especially with regards to the high beta currencies such as
BRL, MXN, TRY, and ZAR.
Mexico reports May trade Tuesday. Export growth slowed in April, while
intermediate and capital goods imports contracted. This does not bode
well for exports in the coming months, but the sluggish economy has led to
significant improvements in the external accounts.
intermediate and capital goods imports contracted. This does not bode
well for exports in the coming months, but the sluggish economy has led to
significant improvements in the external accounts.
Brazil reports May current account and FDI
data Tuesday. The sluggish
economy has helped improve the external accounts, and the current account
deficit (-1.06% of GDP in April) is totally covered by FDI. Brazil then
reports central government budget data Thursday and consolidated data Friday.
Tax revenues softened in May, so we see upside risks to the deficits.
data Tuesday. The sluggish
economy has helped improve the external accounts, and the current account
deficit (-1.06% of GDP in April) is totally covered by FDI. Brazil then
reports central government budget data Thursday and consolidated data Friday.
Tax revenues softened in May, so we see upside risks to the deficits.
Czech National Bank meets Thursday and is
expected to keep rates steady at 0.05%.
CPI rose 2.4% y/y in May, abpve the 2% target but within the 1-3% target
range. Central bank officials are in no hurry to hike. Though
forward guidance is a Q3 hike, officials have noted that CZK strength is likely
to push the timing into Q4.
expected to keep rates steady at 0.05%.
CPI rose 2.4% y/y in May, abpve the 2% target but within the 1-3% target
range. Central bank officials are in no hurry to hike. Though
forward guidance is a Q3 hike, officials have noted that CZK strength is likely
to push the timing into Q4.
Korea reports May IP Friday, which is
expected at -0.2% y/y vs. +1.7% in April. It then reports June trade data Saturday. Soft data and
low inflation should allow the BOK to keep rates steady this year. Next
policy meeting is July 13, no change is expected then.
expected at -0.2% y/y vs. +1.7% in April. It then reports June trade data Saturday. Soft data and
low inflation should allow the BOK to keep rates steady this year. Next
policy meeting is July 13, no change is expected then.
China reports official June manufacturing
PMI Friday, which is expected at 51.0 vs. 51.2 in May. The economy stabilized in Q2, and this is expected to
continue into H2. Caixin manufacturing PMI fell below 50 in May (June
reading out on July 3) even as the official one has stayed above 50.
PMI Friday, which is expected at 51.0 vs. 51.2 in May. The economy stabilized in Q2, and this is expected to
continue into H2. Caixin manufacturing PMI fell below 50 in May (June
reading out on July 3) even as the official one has stayed above 50.
South Africa reports May money and private
sector credit data as well as trade and budget balances Friday. Money and credit growth are expected to
accelerate modestly in nominal, but in real terms, both series are contracting.
We think the SARB will cut rates in H2. Next policy meeting is July
20, which seems too soon for a cut.
sector credit data as well as trade and budget balances Friday. Money and credit growth are expected to
accelerate modestly in nominal, but in real terms, both series are contracting.
We think the SARB will cut rates in H2. Next policy meeting is July
20, which seems too soon for a cut.
Turkey reports May trade Friday, which is
expected at -$7.7 bln vs. -$5 bln in April. If so, the 12-month total would jump to -$60 bln, the highest
since March 2016. The external accounts are likely to worsen, with a
growing share of the deficit to be financed by hot money.
expected at -$7.7 bln vs. -$5 bln in April. If so, the 12-month total would jump to -$60 bln, the highest
since March 2016. The external accounts are likely to worsen, with a
growing share of the deficit to be financed by hot money.
Poland reports June CPI Friday, which is
expected to remain steady at 1.9% y/y.
If so, it would remain below the 2.5% target but still within the
1.5-3.5% target range. The central bank sees the first hike in 2018,
though some officials are pushing it out into 2019.
expected to remain steady at 1.9% y/y.
If so, it would remain below the 2.5% target but still within the
1.5-3.5% target range. The central bank sees the first hike in 2018,
though some officials are pushing it out into 2019.
Chile reports May unemployment and IP
Friday. The economy remains
weak, but the central bank has signaled that the easing cycle is over for now.
Next policy meeting is July 13, no change is expected then.
Friday. The economy remains
weak, but the central bank has signaled that the easing cycle is over for now.
Next policy meeting is July 13, no change is expected then.
Colombia central bank meets Friday and is
expected to cut rates 50 bp to 5.75%.
However, the market is split. Of the 13 analysts polled by
Bloomberg, 6 see a 25 bp cut to 6.0% and 7 see a 50 bp cut.
expected to cut rates 50 bp to 5.75%.
However, the market is split. Of the 13 analysts polled by
Bloomberg, 6 see a 25 bp cut to 6.0% and 7 see a 50 bp cut.
Peru reports June CPI Saturday. CPI rose 3% y/y in May, right at the top
of the 1-3% target range. Yet the economy remains weak, which is why the
central bank started the easing cycle with a 25 bp cut in May. It stood
pat in June, but we look for another 25 bp cut to 3.75% at the next policy
meeting on July 13.