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Brown Brothers Harriman: Emerging Markets Preview for the Week Ahead

EM FX came under renewed pressure last week as US yields rose to new highs for the cycle. RUB and TRY were the top performers last week, while MXN and COP were the worst. There are no Fed speakers this week due to the embargo ahead of the May 2 FOMC meeting. While we see little chance of a hike then, markets are likely to remain nervous.

Singapore reports March CPI Monday, which is expected to remain steady at 0.5% y/y. March IP will be reported Thursday, which is expected to rise 5.3% y/y vs. 8.9% in February. Economic data have come in on the soft side, and so we expect the MAS to keep policy steady at its next meeting in October.

Poland reports March retail sales Monday, which are expected to rise 8.1% y/y vs. 7.9% in February. Central bank minutes will be released Friday. The bank tilted more dovish at that meeting, with Glapinski saying there was even a chance for another rate cut. Next policy meeting is May 16, no change is expected then.

Taiwan reports March IP Monday, which is expected to rise 2.1% y/y vs. -1.9% in February. Q1 GDP will be reported Friday, with growth expected at 2.8% y/y vs. 3.3% in Q4. The recovery remains sluggish, with price pressures remaining low. We expect the central bank to remain on hold this year, though markets are looking for a hike by year-end.

National Bank of Hungary meets Tuesday and is expected to keep rates steady at 0.90%. CPI rose 2.0% y/y in March, right at the bottom of the 2-4% target range. As such, there is the possibility that the bank adds more stimulus via unconventional measures.

Mexico reports mid-April CPI Tuesday, which is expected to rise 4.7% y/y vs. 5.2% in mid-March. If so, it would be the lowest since January 2017 but still above the 2-4% target range. Banco de Mexico releases its minutes Thursday. Next policy meeting is May 17, no change is expected then if the peso remains stable. March trade will be reported Friday.

Central Bank of Turkey meets Wednesday and is expected to hike the Late Liquidity rate 50 bp to 13.25%. However, the market is split. Of the 15 analysts polled by Bloomberg, 3 see steady rates, 1 sees a 25 bp hike, 6 see a 50 bp hike, 3 see a 75 bp hike, and 2 see a 100 bp hike. Much will depend on the lira. If it comes under renewed pressure next week, then a hike becomes more likely.

Brazil reports March current account and FDI data Wednesday. Central government budget data will be reported Thursday. The budget numbers have improved due to the economic recovery, but the lack of pension reforms means this improvement will only be temporary.

Korea reports Q1 GDP Thursday, with growth expected at 2.9% y/y vs. 2.8% in Q4. CPI rose only 1.3% y/y in March, well below the 2% target. As such, the Bank of Korea is likely to proceed cautiously with its tightening cycle. Next policy meeting is May 24, no change is expected then.

Central Bank of Russia meets Friday and is expected to keep rates steady at 7.25%. The bank restarted the easing cycle back in 2016, but recent ruble weakness should keep it on hold for the time being. Much will depend on whether the US enacts more sanctions on Russia.

Colombia central bank meets Friday and is expected to cut rates 25 bp to 4.25%. CPI rose 3.1% y/y in March, just above the 3% target and within the 2-4% target range. The central bank is likely nearing the end of its easing cycle, with perhaps one more cut after this to 4.0%.

Check out the EM Preview for the Week Ahead and other musings & insights on Emerging Markets at BBH’s “Mind on the Markets” blog.

Global Macro Investor Insights

Win Thin is the Global Head of Emerging Markets Strategy and has over 25 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. Prior to that, Win was a vice president and international economist, covering major emerging markets in Asia and Latin America for Alliance Capital Management

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