EM FX closed the week on a firm note, as softer than expected US CPI data weighed on the dollar. We continue to believe that investors are underestimating the Fed’s tightening potential. Meanwhile, idiosyncratic political risk remains high for MXN, TRY, and ZAR.
China reports CPI and PPI Monday. The former is expected to rise 1.6% y/y and the latter by 6.4% y/y. The 19th CPC National Congress begins Wednesday. China then reports September retail sales, IP, and Q3 GDP Thursday. The y/y readings are expected at 10.2%, 6.4% y/y, and 6.8% y/y, respectively. Over the weekend, China reported stronger than expected September money and new loan data that supports the view that the economic outlook in Q4 will remain solid.
Israel reports September CPI Monday, which is expected at -0.2% y/y vs. -0.1% in August. If so, this would be well below the 1-3% target range. Bank of Israel then meets Thursday and is expected to keep rates steady at 0.10%. The bar to further easing is high, but current loose policy is likely to be maintained through 2018.
Indonesia reports September trade Monday. Exports are expected to rise 18% y/y and imports by 20.6% y/y. Bank Indonesia then meets Thursday and is expected to keep rates steady at 4.25%. CPI rose 3.7% y/y in September, in the bottom half of the 3-5% target range. BI has said further easing will be data dependent.
Poland reports August trade and current account data Monday. Poland then reports September industrial and construction output, PPI, and real retail sales Wednesday. The economy is expected to remain robust, which we think makes it difficult to justify steady rates through 2018. The central bank releases its minutes Thursday.
Singapore reports September trade Tuesday, with NODX expected to rise 12.7% y/y vs. 17.0% in August. Last week, the MAS tweaked its forward guidance to give it flexibility on policy. At the same time, it highlighted slower growth and low price pressures in 2018. April tightening is possible, but will depend on how Q4 and Q1 data come in.
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