EM Preview for the Week Ahead

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EM FX ended the week on a firmer note.  Weaker than expected US jobs data hurt the dollar, but it later recovered after press reports that the ECB may delay its tapering decision until December.  For now, the global liquidity outlook remains EM-supportive.

Indonesia reports August CPI Monday, which is expected to rise 3.98% y/y vs. 3.88% in July.  If so, this would right at the 4% target and still within the 3-5% target range.  Bank Indonesia surprised the markets with a 25 bp cut this month, and is likely to continue cutting in Q4.  The next meeting September may be too soon.

Korea reports July current account data Tuesday.  Both the July and August trade surpluses were larger than expected, with exports stronger than expected and imports slightly weaker than expected.  The external accounts remain in very good shape, which should lend support to the won.

The Philippines reports August CPI Tuesday, which is expected to rise 3.0% y/y vs. 2.8% in July.  If so, this would right at the 3% target and still within the 2-4% target range.  For now, the central bank is likely to keep rates on hold to see how the economic outlook develops.  Next policy meeting is, no change is expected.

Turkey reports August CPI Tuesday, which is expected to rise 10.2% y/y vs. 9.8% in July.  If so, this would be the first acceleration since April and further above the 3-7% target range.  For now, the central bank is likely to remain on hold until price pressures fall a lot further.  Next policy meeting is September 14, no change is expected then. July IP will be reported Friday and is expected to rise 9.0% y/y vs. 3.4% in June.

Czech Republic reports July retail sales Tuesday, which are expected to rise 6.0% y/y vs. 4.5% in June.  It then reports July construction and industrial output and trade Wednesday.  Overall, the economy remains robust even as inflation of 2.5% is above the 2% target.  Tightening should continue at a modest pace.  Next policy meeting is September 27, no change is expected then.

Hungary reports July retail sales Tuesday, which are expected to rise 5.6% y/y vs. 5.7% in June.  It then reports July IP Wednesday, which is expected to rise 7.0% y/y vs. 6.5% in June.  Central bank minutes will also be released Wednesday.  August CPI will be reported Friday, and is expected to rise 2.6% y/y vs. 2.1% in July.  If so, this would be the highest since March but still  below the 3% target and within the 2-4% target range.  Next policy meeting is September 19.  July trade will also be reported Friday.

Taiwan reports August CPI Tuesday, which is expected to rise 1.2% y/y vs. 0.8% in July.  The central bank does not have an explicit inflation target, but low price pressures should allow it to keep rates steady for now.  Next quarterly policy meeting is in September, no change is expected.  Taiwan reports August trade Friday.  Exports are expected to rise 12.5% y/y and imports by 6.5% y/y.

South Africa reports Q2 GDP Tuesday, which is expected to grow 2.3% SAAR vs. -0.7% in Q1.  It then reports July manufacturing output Thursday, which is expected to contract -0.5% y/y vs. -2.3% in June.  Overall, the growth outlook remains weak and so we expect easing to continue.  Next SARB meeting is September 21, and another 25 bp cut to 6.5% is likely.

Chile reports July GDP proxy Tuesday.  It then reports August trade Thursday and CPI Friday.  Inflation is expected to rise 1.9% y/y vs. 1.7% in July, which would still be below the 3% target as well as the 2-4% target range.  While the central bank signaled an end to the easing cycle at its last cut in May, some bank officials remain dovish with one voting for a cut at the last two meetings and another expressing concerns about growth.  Next policy meeting is September 14, no change is expected then.

Brazil reports July IP Tuesday, which is expected to rise 0.5% m/m vs. a flat reading in June.  COPOM then meets Wednesday and is expected to cut rates 100 bp to 8.25%.  Prior to the decision, Brazil reports August IPCA inflation, which is expected to rise 2.60% y/y vs. 2.71% in July.  If so, this would be another cycle low and the lowest rate since February 1999.

Colombia reports August CPI Tuesday, which is expected to rise 3.8% y/y vs. 3.4% in July.  If so, this would be above the 3% target but still within the 2-4% target range.  The weak economy led the bank to cut 25 bp to 5.25% on Friday.  While some believe the end of the easing cycle is nearing, we believe it could be extended.  Next policy meeting is September 29, and another 25 bp cut to 5.0% is possible then.

Malaysia reports July trade Wednesday.  Bank Negara then meets Thursday and is expected to keep rates steady at 3.0%.  Inflation eased to 3.2% y/y in July, the lowest since January.  Bank Negara does not have an explicit inflation target, but low price pressures should allow it to remain on hold for now.

Russia reports August CPI Wednesday, which is expected to rise 3.7% y/y vs. 3.9% in July.  If so, this would be further below the 4% target and should allow easing to resume.  The next policy meeting is September 15, and another 25 bp cut to 8.75% seems likely after it kept rates steady at the July 28 meeting.

National Bank of Poland meets Wednesday and is expected to keep rates steady at 1.5%.  Inflation was steady at 1.8% y/y in August, below the 2.5% target and near the bottom of the 1.5-3.5% target range.  The bank has signaled no rate hikes in 2017, with some officials expressing doubts about tightening in 2018.

Mexico reports August CPI Thursday.  Inflation remains above the 2-4% target range, but it is showing signs of topping out.  Banxico just upgraded its 2017 and 2018 growth forecasts, and so we see no urgency to cut rates.  Next policy meeting is September 28, no change is expected then.  Bloomberg consensus sees the first rate cut in Q2 2018.

China reports August trade Friday.  Exports are expected to rise 5.1% y/y and imports by 10% y/y.  It then reports August CPI and PPI Saturday, which are expected to rise 1.6% y/y and 5.4% y/y, respectively.  PBOC is targeting 3% inflation this year.