Previous post Next post

EM Preview for the Week Ahead

EM FX was mostly weaker last week due to doubts about a Phase One trade deal between the US and China. Those talks continue this week and while we expect a deal to be struck, there is likely to be a lot of last minute posturing that will likely keep markets volatile over the short-run. In the meantime, investors need to beware of idiosyncratic country risk within EM.  


Chile reports Q3 GDP Tuesday, with growth expected at 3.3% y/y vs. 1.9% in Q2. Still, this is old news as the protests will clearly have a negative impact on Q4 growth. Next policy meeting is December 6 and a 25 bp cut to 1.5% is expected. Chilean assets saw a relief rally last week on news that lawmakers reached an accord to draw up a new constitution. However, investors should remain cautious until the framework becomes clearer.

Brazil reports mid-November IPCA inflation Friday. Inflation is expected at 2.69% y/y vs. 2.72% in mid-October. If so, inflation would remain below the 2.75-5.75% target range. Next COPOM meeting is December 11 and a 50 bp cut to 4.5% is expected. CDI market is pricing in one last 25 bp cut in February that would take the policy rate down to 4.25%.

Mexico reports mid-November CPI Friday. Inflation is expected at 3.09% y/y vs. 3.01% in mid-October. If so, inflation would remain near the 3% target and well within the 2-4% target range. Next policy meeting is December 19 and another 25 bp cut to 7.25% is expected. Two dissents were seen in November in favor of a 50 bp cut. If data worsen significantly, we cannot rule out a bigger move next month.


National Bank of Hungary meets Tuesday and is expected to keep rates steady. CPI rose 2.9% y/y in October, below the 3% target but within the 2-4% target range. Recent real sector data have come in stronger than expected and so the bank is likely to be on hold for now. However, the bank is likely to continue adding back excess liquidity to the system at the December meeting in order to ensure that the economy continues to outperform.

South Africa reports October CPI Wednesday, with headline inflation expected to ease to 3.9% y/y from 4.1% in September. If so, it would be the lowest since March 2018 and move closer to the bottom of the 3-6% target range. South Africa Reserve Bank meets Thursday and is expected to keep rates steady at 6.5%. A couple of analysts look for a 25 bp cut to 6.25%. Given how weak the economic outlook is, we look for a dovish surprise this week.

Poland reports October industrial and construction output and PPI Friday. All are expected to slow from September. CPI rose 2.5% y/y in October, the lowest since May and right at the central bank’s target. With growth slowing, policymakers have started to talk about possible easing. However, we’re not there yet. Next policy meeting is December 4 and no change is expected then.


Thailand reports Q3 GDP Monday, with growth expected at 2.7% y/y vs. 2.3% in Q2. Despite the expected uptick in growth, the economy remains vulnerable due in large part to the strong baht. CPI rose 0.11% y/y in October, the lowest since June 2017 and below the bottom of the 1-4% target range. Next policy meeting is December 18 and a 25 bp cut to 1.0% is expected.

Malaysia reports October CPI Wednesday, and inflation is expected to ease to 1.0% y/y from 1.1% in September. While Bank Negara does not have an explicit inflation target, low price pressures will allow it to ease policy in 2020 if the economy slows further.

Taiwan reports October export orders Wednesday and are expected to contract -4.5% y/y vs. -4.9% in September. This suggests little relief to regional trade over the next six months. Tensions with China mounted over the weekend as a mainland aircraft carrier passed through the Taiwan Strait. Taiwan scrambled its jets to monitor the fleet and comes ahead of Taiwan elections scheduled for January.

Korea reports trade data for the first twenty days of November Thursday. Along with Taiwan export orders, this early trade data provides a good reading for the entire region in terms of activity and growth. The US and Korea postponed a joint military training exercise planned for this month. Last week, North Korea blamed the drills for inflaming tensions on the Korean peninsula. Pyongyang said this was a positive gesture but still threatened “shocking punishment” if the US were to go ahead with any “hostile provocation.”

Bank Indonesia meets Thursday and is expected to keep rates steady at 5.0%. A couple of analysts look for a 25 bp cut to 4.75%. CPI rose 3.13% y/y in October, the lowest since April and below the bottom of the 3-5% target range. We see risks of a dovish surprise, especially given signs that the economy is slowing.

Full story here Are you the author?
About Win Thin
Win Thin
Win Thin is a senior currency strategist with over fifteen years of investment experience. He has a broad international background with a special interest in developing markets. Prior to joining BBH in June 2007, he founded Mandalay Advisors, an independent research firm that provided sovereign emerging market analysis to institutional investors. He received an MA from Georgetown University in 1985 and a B.A. from Brandeis University 1983. Feel free to contact the Zurich office of BBH
Previous post See more for 5.) Brown Brothers Harriman Next post
Tags: ,

Permanent link to this article:

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

This site uses Akismet to reduce spam. Learn how your comment data is processed.