by Summary:
EM and other risk assets rallied on Friday after the strong US jobs data. It appears that markets are pricing in a benign backdrop for risk near-term; that is, the US economy is recovering but not by enough to warrant an imminent Fed rate hike. The July 27 meeting seems unlikely, and so the next likely window would be September 21. Yet EM typically weakens in the run-up to FOMC meetings and so investors should be very careful about taking on too much risk. China has been on the back burner leading up to the Brexit vote and in its aftermath. It reports a slew of data this week, which are all expected to show continued but modest slowing. This benign scenario could be tested, especially if the Chinese equity or FX markets get more volatile. The central banks of Korea, Malaysia, Chile, and Peru all meet this week. No action is expected from any of them, but there are small dovish risks from Korea and Malaysia. China China is likely to report June money and loan data this week, but no date has been set yet. Over the weekend, CPI and PPI came in at 1.9% y/y and -2.6% y/y, respectively. China reports June trade Wednesday, with exports expected at -5.0% y/y and imports at -6.2% y/y. June IP and retail sales will be reported Friday, with the former expected to rise 5.
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Win Thin considers the following as important: emerging markets, Featured, newslettersent
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EM and other risk assets rallied on Friday after the strong US jobs data. It appears that markets are pricing in a benign backdrop for risk near-term; that is, the US economy is recovering but not by enough to warrant an imminent Fed rate hike. The July 27 meeting seems unlikely, and so the next likely window would be September 21. Yet EM typically weakens in the run-up to FOMC meetings and so investors should be very careful about taking on too much risk. China has been on the back burner leading up to the Brexit vote and in its aftermath. It reports a slew of data this week, which are all expected to show continued but modest slowing. This benign scenario could be tested, especially if the Chinese equity or FX markets get more volatile. The central banks of Korea, Malaysia, Chile, and Peru all meet this week. No action is expected from any of them, but there are small dovish risks from Korea and Malaysia. China China is likely to report June money and loan data this week, but no date has been set yet. Over the weekend, CPI and PPI came in at 1.9% y/y and -2.6% y/y, respectively. China reports June trade Wednesday, with exports expected at -5.0% y/y and imports at -6.2% y/y. June IP and retail sales will be reported Friday, with the former expected to rise 5.
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Win Thin considers the following as important: emerging markets, Featured, newslettersent
This could be interesting, too:
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EM and other risk assets rallied on Friday after the strong US jobs data. It appears that markets are pricing in a benign backdrop for risk near-term; that is, the US economy is recovering but not by enough to warrant an imminent Fed rate hike. The July 27 meeting seems unlikely, and so the next likely window would be September 21. Yet EM typically weakens in the run-up to FOMC meetings and so investors should be very careful about taking on too much risk.
China has been on the back burner leading up to the Brexit vote and in its aftermath. It reports a slew of data this week, which are all expected to show continued but modest slowing. This benign scenario could be tested, especially if the Chinese equity or FX markets get more volatile. The central banks of Korea, Malaysia, Chile, and Peru all meet this week. No action is expected from any of them, but there are small dovish risks from Korea and Malaysia.
China
China is likely to report June money and loan data this week, but no date has been set yet. Over the weekend, CPI and PPI came in at 1.9% y/y and -2.6% y/y, respectively. China reports June trade Wednesday, with exports expected at -5.0% y/y and imports at -6.2% y/y. June IP and retail sales will be reported Friday, with the former expected to rise 5.9% y/y and the latter to rise 9.9% y/y. Q2 GDP will also be reported, with growth expected at 6.6% y/y vs. 6.7% in Q1.
Israel
Bank of Israel releases minutes from its June policy meeting Monday. At that meeting, it kept rates steady at 0.10%. Israel then reports June trade data on Wednesday. June CPI will be reported Thursday, and is expected to remain steady at -0.8% y/y. Ongoing deflation risks will keep the central bank in dovish mode, but we think it would take a significant hit to the economic outlook to get an unconventional policy response.
Mexico
Mexico reports June ANTAD retail sales data Monday. It then reports May IP Tuesday, which is expected to rise 0.3% m/m vs. -0.7% in April. Banco de Mexico releases minutes from its June meeting Thursday. At that last meeting, it surprised markets with a larger than expected 50 bp cut and so the minutes will be scrutinized for clues on future moves. With the growth outlook worsening, we think another hike will be hard to justify. Next policy meeting is August 11.
Malaysia
Malaysia reports May IP Tuesday, which is expected to rise 2.5% y/y vs. 3.0% in April. May manufacturing sales will also be reported then. Bank Negara then meets Wednesday and is expected to keep rates steady at 3.25%. One lone analyst is looking for a 25 bp cut to 3.0%. While the July meeting is likely to soon, we think that the bank will tilt more dovish in H2 as the data soften.
Czech Republic
Czech Republic reports June CPI Tuesday, which is expected to remain steady at 0.1% y/y. This is well below the 1-3% target range. For now, the central bank is maintaining policy and forward guidance to mid-2017. Next policy meeting is August 4. If the data soften in H2, the bank could extend its forward guidance but this meeting may be too soon. That will be the first one under new Governor Rusnok.
South Africa
South Africa reports May manufacturing production Tuesday, which is expected to rise 2.3% y/y vs. 2.9% in April. It then reports May retail sales Wednesday, which are expected to rise 1.4% y/y vs. 1.5% in April. The economy remains soft. With the rand firming a bit, the SARB may be able to avoid another rate hike at its next meeting July 21. June CPI will be reported July 20, and will be the key factor.
India
India reports June CPI and May IP Tuesday. The former is expected to rise 5.8% y/y, while the latter is expected to fall -0.4% y/y. India then reports June trade Wednesday and June WPI (expected to rise 1.3% y/y) Thursday. Price pressures are picking up, and so the RBI is likely to keep rates on hold for now. The next policy meeting is August 9, and no change is seen then. That will be Governor Rajan’s last meeting, and we suspect Modi will appoint someone more dovish to replace him.
Brazil
Brazil reports May retail sales Tuesday, which are expected at -6.1% y/y vs. -6.7% in April. It then reports the monthly GDP proxy for May on Wednesday, which is expected at -3.9% y/y vs. -5% in April. While the economy seems to be bottoming, we think robust growth won’t be seen until 2017 at the earliest. COPOM next meets July 20 and is unlikely to start the easing cycle then. The meeting after that on August 31 may be a better bet.
Singapore
Singapore reports Q2 GDP Thursday, which is expected to grow 2.2% y/y vs. 1.8% in Q1. It then reports May retail sales Friday. Singapore’s real effective exchange rate has been appreciating this year, despite the MAS easing in April. If the economic outlook remains soft, we think another easing move at the October meeting is possible.
Korea
Bank of Korea meets Thursday and is expected to keep rates steady at 1.25%. We do not think that the 25 bp cut in June was “one and done” and so we think there is a small chance of a dovish surprise. However, given the BOK’s cautious approach, it may wait a month or two before cutting again.
Turkey
Turkey reports May IP Thursday, which is expected to rise 3.9% y/y vs. 0.7% in April. It also reports May current account data that day, and is expected at -$2.8 bln vs. -$3 bln in April. Overall, the economy remains fairly soft and the central bank is likely to come under greater pressure to ease policy. Next policy meeting is July 19, but high inflation in June should prevent a cut in the benchmark rate then.
Chile
Chilean central bank meets Thursday and is expected to keep rates steady at 3.5%. CPI rose 4.2% y/y in June, slightly above the 2-4% target range but still converging. We think the tightening cycle has ended, as the economic outlook remains soft along with low copper prices.
Peru
Peruvian central bank meets Thursday and is expected to keep rates steady at 4.25%. CPI rose 3.3% y/y in June, slightly above the 1-3% target range but still converging. We think the tightening cycle has ended.
Colombia
Colombia reports May retail sales and IP Friday. The former is expected to rise 5.2% y/y, while latter is expected to rise 7.1% y/y. The economy remains robust, while inflation continues to rise. The higher than expected 8.6% y/y print for June could lead to another 25 bp hike July 29, even though the central bank seemed to suggest that it would like to end the tightening cycle after the June hike.