From Brown Brothers Harriman & Co.'s Global Head of Emerging Markets Strategy via Marc to Market:
(from my colleague Dr. Win Thin)
EM FX ended Friday on a mixed note, with TRY and ARS leading the gains. However, the jobs data supports our view that the Fed is likely to continue hiking rates, which is negative for EM. Furthermore, trade tensions will remain high after the US announced plans to slap tariffs on an additional $267 bln of Chinese imports. This negative backdrop should weigh on EM this week.
China reports August CPI and PPI Monday. CPI is expected to rise 2.1% y/y and PPI by 4.0% y/y. Money and loan data will be reported this week, but no date has been set. Retail sales and IP will be reported Friday. Sales are expected to rise 8.8% y/y while IP is expected to rise 6.2% y/y. We do not any further stimulus for the time being, as the previous measures are still taking effect.
Czech Republic reports August CPI Monday, which is expected to rise 2.4% y/y vs. 2.3% in July. If so, it would above the 2% target but within the 1-3% target range. The central bank should continue its tightening cycle. Next policy meeting is September 26, but three hikes in a row seem to be aggressive. Rather, we favor a hike at either the November 1 or December 20 meetings.
Turkey reports Q2 GDP Monday, which is expected to grow 5.3% y/y vs. 7.4% in Q1. The central bank meets Thursday. Expectations are all over the place, with 2 analysts looking for no change and 1 looking for a 725 bp hike to 25%. The median forecast is a 300 bp hike to 20.75%, which would mirror the bare minimum that the bank did back in May. The bank has tended to disappoint at every juncture during this crisis, and we think even a 300 bp hike would be a green light to sell the lira again. July current account data will be reported Friday.
The Philippines reports July trade Tuesday. Exports have been contracting this year even as inflation spiked to 6.4%y/y in August. Next policy meeting is September 27 and a 50 bp hike is expected. Governor Espenilla warned that a policy meeting outside of the scheduled six-week cycle is an option.
Hungary reports August CPI Tuesday, which is expected to rise 3.3% y/y vs. 3.4% in July. If so, inflation would remain above the 3% target but within the 2-4% target range. Bloomberg consensus sees a gradual tightening cycle starting in 2019. Next policy meeting is September 18, no change is expected then.
South Africa reports July manufacturing production Tuesday, which is expected to rise 0.9% y/y vs. 0.7% in June. July retail sales will be reported Wednesday, which are expected to rise 1.6% y/y vs. 0.7% in June. The economy remains weak even as inflation is rising. Next policy meeting is September 20, and we expect a hawkish hold. The market sees tightening starting around mid-2019 but we think the weak rand will force SARB to hike sooner than that....
...
MORE
