Emerging Markets: Week Ahead Preview – Oct. 23


EM FX ended the week on a soft note. Indeed, nearly every EM currency was down for the entire week, led by ZAR, BRL, and TRY.  While higher US rates will pressure EM FX as a whole, we think heightened political risk will continue to hit these three currencies particularly hard, plus perhaps MXN too.  

Korea reports trade data for the first 20 days of October Monday. It then reports Q3 GDP Thursday, which is expected to grow 3.0% y/y vs. 2.7% in Q2.  The economic outlook is solid, while price pressures remain low. For now, the BOK can take a wait and see approach and keep rates steady well into 2018.

Singapore reports September CPI Monday, which is expected to remain steady at 0.4% y/y. The MAS just left policy unchanged at this month’s meeting. While it tweaked its forward guidance slightly, the MAS will find it hard to tighten at the next meeting in April if price pressures remain so low. Singapore then reports September IP Thursday, which is expected to rise 10.4% y/y vs. 19.1% in August. Q3 unemployment will be reported Friday and is expected to remain steady at 2.2%.

Taiwan reports September IP Monday, which is expected to rise 4.5% y/y vs. 3.25% in August. The economic outlook is solid, but there are no price pressures to speak of. CPI rose only 0.5% y/y in September. The central bank does not have an explicit inflation target, but we think low readings will allow it to keep policy steady well into 2018.

Hungary central bank meets Tuesday and is expected to keep rates steady. It just loosened policy at its September meeting, and is unlikely to move again until the December meeting. The economy remains robust, and so we think any further easing is risky as price pressures in the region are picking up.  

Mexico reports mid-October CPI and August GDP proxy Tuesday. Inflation appears to be topping out, but recent peso weakness is the wild card.  We think Banxico would prefer not to hike again, but the exchange rate may force its hand. Next policy meeting is November 9, our base case now is no change then.  Mexico then reports September trade data Thursday.  

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