EM FX was mostly softer last week as the dollar really continued on stronger than expected U.S. data. Fed repricing has been violent, with easing expectations pushed further out. THB, IDR, and PHP outperformed while HUF, COP, and CLP underperformed. U.S. data this week should show that the labor market remains in good shape and that consumption remains robust, which should help the dollar gain further.

AMERICAS

Colombia reports February IP and retail sales Monday. IP is expected at -0.8% y/y vs. -1.5% in January, while sales are expected at -2.7% y/y vs. -3.9% in January. The economy is picking up, but the central bank is prepared to continue easing. Regarding lower inflation, Governor Villar said “If these expectations adjust toward the target, and if the projections of the bank’s own economists are consistent with the target, more significant adjustments in the interest rate become easier.” He suggested rate cuts will be predictable, noting that “Big surprises can generate nervousness and significant changes in the direction of capital flows.” The bank cut rates 50 bp to 12.25% March 22, as expected. Next meeting is April 30 and if the peso remains relatively firm, another 50 bp cut seems likely. The market is pricing in 350 bp of total easing over the next year that would see the policy rate bottom near 8.75%.

Brazil reports February GDP proxy Wednesday. Growth is expected at 3.20% y/y vs. 3.45% in January. The economy has been picking up recently, which is good news since the central bank easing cycle is likely nearing an end. The market is pricing in 75 bp of easing over the next three months that would see the policy rate bottom at 10.0%.

EUROPE/MIDDLE EAST/AFRICA

Israel reports March CPI Monday. Headline is expected to rise a tick to 2.6% y/y. If so, it would be the first acceleration since August but would still remain within the 1-3% target range. The Bank of Israel last week left rates steady at 4.5%. It sees the policy rate at 3.75% in Q1 2025, which is lower than market pricing for a terminal rate between 4.0-4.25%. Next meeting is May 27, and no change is expected then. Uncertainty is running high after Iran’s weekend missile attack. Much will depend on whether Israel retaliates.

Poland reports March core CPI Tuesday. It is expected at 4.6% y/y vs. 5.4% in February. If so, it would be the lowest since October 2021 and continues the disinflation process. Headline CPI fell to 1.9% y/y in March, the lowest since March 2019. At the last policy meeting April 4, the bank kept rates steady and repeated that no MPC members are talking about rate cuts in 2024 as current levels are “very restrictive.” He added that cuts in 2025 will depend on inflation late this year. Next meeting is May 9, and no change is expected then. The market is pricing in only 25 bp of easing over the next year.
Next meeting is May 9.

South Africa reports March CPI Wednesday. Headline is expected at 5.4% y/y vs. 5.6% in February, while core is expected at 4.9% y/y vs. 5.0% in February. At the last policy meeting March 27, the SARB kept rates steady at 8.25% and nudged its expected rate path higher as it pushed back the timing of hitting its 4.5% inflation target to Q4 2025 from Q3 previously. Its model sees the policy rate at 7.72% by end-2024 vs. 7.54% previously and at 7.37% by end-2025 vs. 7.29% previously. The market is pricing in steady rates over the next six months. February retail sales will also be reported Wednesday and are expected at -1.5% y/y vs. -2.1% in January.

ASIA

People’s Bank of China sets its key 1-year MLF rate Monday. It is expected to remain unchanged at 2.50%. China reports Q1 GDP, March IP, retail sales, and fixed asset investment Tuesday. Growth is expected at 1.5% q/q vs. 1.0% in Q4, while the y/y rate is expected at 4.8% vs. 5.2% in Q4. Elsewhere, IP is expected at 6.0% y/y vs. 7.0% in January-February and sales are expected at 5.4% y/y vs. 5.5% in January-February. Disappointing trade data last week suggest some downside risks to this batch of data.

Singapore reports March trade data Wednesday. NODX are expected at -6.7% y/y vs. -0.1% in February. If so, it would be the weakest since September. The Monetary Authority of Singapore left policy unchanged last week and sees economic growth picking up this year. However, we believe the MAS is being too optimistic and see risks that it eases policy in H2.