EM Preview for the Week of June 12, 2022

June 12, 2022

EM FX was broadly weaker as the dollar reasserted its underlying strength across the board. RUB was the only EM currency to gain, while BRL, CLP, TRY, and COP were the worst performers. With Fed tightening expectations rising ahead of this Wednesday’s FOMC decision, ECB tightening expectations picking up after last week’s decision, and BOE tightening expectations picking up ahead of its decision this Thursday, we expect EM and other risk assets to remain under pressure as global liquidity continues to recede.


Colombia reports April manufacturing production and retail sales data Wednesday. Manufacturing is expected at 10.3% y/y vs. 12.3% in March, while sales are expected at 16.7% y/y vs. 12.0% in March. April trade and GDP proxy will be reported Friday. GDP is expected at 9.3% y/y vs. 7.6% in March. With the economic recovery still robust, all attention is on politics as Colombia holds its second round presidential vote Sunday June 19. Weekend polls suggest it’s going to be close. The latest Yanhaas poll shows Petro with 45% support vs. 35% for Hernandez. This compares to a Guarumo and EcoAnalitica poll also released over the weekend that shows Hernandez with 48.2% support vs. 46.5% for Petro, which is within the margin of error. There will be no more polls published this week.

Brazil reports May trade data Monday. COPOM meets Wednesday and is expected to hike rates 50 bp to 13.25%. At the last meeting, COPOM hiked rates 100 bp to 12.75% but signaled future hikes would likely be smaller. The swaps market is pricing in another 75 bp of tightening over the next 3 months that would see the policy rate peak near 13.50%, which suggests a final 25 bp hike at the next meeting August 3. IPCA inflation eased to 11.73% y/y in May vs. 12.13% in April, the first deceleration since December but still well above the 2-5% target range.


Turkey reports April current account, IP, and retail trade data Monday. The current account deficit is expected at -$3.2 bln, while IP is expected at 6.4% y/y. May central government budget balance will be reported Wednesday. The twin deficits should come further into focus this week and the trends are not good. Financing needs are growing and foreign inflows are not being attracted by relatively low interest rates. The central bank just left rates steady once again but we continue to believe that the country is nearing a turning point. If rates are not allowed to rise, then we believe Turkey will experience a significant balance of payments crisis that would see the lira weaken even more.

Israel reports May consumer confidence and trade data Monday. Q1 current account data will be reported Tuesday. May CPI will be reported Wednesday and headline is expected at 4.3% y/y vs. 4.0% in April. If so, it would be the highest since November 2008 and further above the 1-3% target range. The bank started the tightening cycle with a 25 bp hike April 11 and followed up with a 40 bp hike to 0.75% May 23. Both hikes were larger than expected. Next policy meeting is July 4 and another hike is expected then. The swaps market is pricing in another 175-200 bp of tightening over the next 12 months that would see the policy rate peak between 2.50-2.75%. Q1 GDP data will be reported Thursday.


PBOC sets its 1-year MLF rate this week. Consensus sees steady rates at 2.85%. May new loans and aggregate financing picked up but more easing needs to be seen. May CPI inflation continues to run below the 3% target and so the focus will remain on boosting the economy. May IP and retail sales will also be reported Wednesday. IP is expected at -1.0% y/y vs. -2.9% in April, while sales are expected at -7.1% y/y vs. -11.1% in April. The economy should recover as movement restrictions are lifted but the recovery is likely to be uneven as restrictions will be enacted periodically to help limit any COVID outbreaks.

India reports May CPI Monday. Headline is expected at 7.10% y/y vs. 7.97% in April. If so, it would be the first deceleration since September but still well above the 2-6% target range. WPI will be reported Tuesday and is expected at 15.17% y/y vs. 15.08% in April. If so, that would suggest upward pressure on CPI may persist. The RBI just hiked rates 50 bp to 4.90% last week, as expected. Next policy meeting is August 4 and another 50 bp hike is expected then. Also, we would not rule out another intra-meeting hike if circumstances warrant. The swaps market is pricing in nearly 250 bp of tightening over the next 24 months that would see the policy rate peak near 7.40%.

Taiwan central bank meets Thursday and is expected to hike rates 25 bp to 1.625%. CPI rose 3.39% y/y in May, the highest since August 2012. While the central bank does not have an explicit inflation target, rising price pressures need to be addressed and so the tightening cycle will continue. The swaps market is pricing in 120 bp of tightening over the next 24 months that would see the policy rate peak near 2.60%. Regional tensions are likely to remain high on reports that China has claimed the Taiwan Strait is not international waters. The U.S. believes otherwise and has sent naval vessels through the strait. U.S. Defense Secretary Austin just warned China over the weekend to refrain from “provocative and destabilizing” activity near Taiwan following talks with China’s Defense Minister Wei Fenghe.

More from Mind on the Markets

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2022. All rights reserved..

As of June 15, 2022 Internet Explorer 11 is not supported by BBH.com.

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see bbhluxembourgfunds.com

captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction