(from my colleague Dr. Win Thin)
EM FX ended Friday mixed, capping off a mostly softer week. TRY, MXN, and RUB were the top performers and the only ones up against USD, while ARS, CLP, and BRL were the worst. Looking ahead, US jobs data on Friday pose some risks to EM, coming on the heels of a higher than expected 2% y/y rise in PCE. China will also remain on the market’s radar screen, with the first snapshots of June economic activity just starting to emerge. We remain negative on EM FX.
Mexico reports June PMI Monday. Banco de Mexico releases its minutes Thursday. At that meeting, it hiked rates 25 bp ahead of the election. If markets react badly to the weekend election results (results unknown as of this writing), Banco de Mexico may be forced to hike intra-meeting as the next scheduled meeting isn’t until August 2.
Korea reports June CPI Tuesday, which is expected to rise 1.7% y/y vs. 1.5% in May. If so, it would be the highest since October and nearing the 2% target. Still, BOK has shown no urgency to hike rates again after its first (and last) move in November. Next policy meeting is July 12, no change is likely then. May current account data will be reported Thursday. Over the weekend, Korea reported June trade data.
Hungary reports May retail sales Tuesday, which are expected to rise 5.3% y/y vs. 6.1% in April. Central bank minutes will be released Wednesday. This should be of interest, as the bank seems to have tilted less dovish in response to HUF weakness. Hungary then reports May IP Friday, which is expected to remain steady at 2.9% y/y WDA.
Turkey reports June CPI Tuesday, which is expected to rise 13.88% y/y vs. 12.15% in May. If so, it would be the highest since November 2003 and further above the 3-7% target range. Next central bank policy meeting is July 24. While the bank should hike, it remains to be seen whether President Erdogan will allow it to happen.
Chile reports June trade and May retail sales Tuesday. Sales are expected to rise 4.0% y/y vs. 7.4% in April. It then reports June CPI Friday, which is expected to rise 2.5% y/y vs. 2.0% in May. If so, it would be the highest rate since May 2017 and nearing the 3% target. The bank has signaled a rate hike towards year-end, and inflation data support this notion.
