EM FX was mostly softer last week as the broad dollar recovery continued. THB, ZAR, and PEN outperformed while the CEE currencies underperformed. Data last week showed that global divergences are widening, with the U.S. again at the top of the heap even as the eurozone and U.K. slid towards the bottom. This week’s data should underscore these growing divergences that continue to favor the dollar.
AMERICAS
Brazil reports October current account and FDI data Monday. It reports mid-November IPCA inflation Tuesday. Headline is expected at 4.64% y/y vs. 4.47% in mid-October. If so, it would be the highest since mid-December 2023 and above the 1.5-4.5% target range. At the last COPOM meeting, the central bank hiked rates 50 bp to 11.25% and noted that “The Committee stresses that a credible fiscal policy committed to debt sustainability, with the presentation and execution of structural measures for the fiscal budget, will contribute to the anchoring of inflation expectations and to the reduction in the risk premia of financial assets, therefore impacting monetary policy.” Next meeting is December 11 and the CDI market is pricing in a 75 bp hike to 12.0%. Looking ahead, the swaps market is pricing in 300 bp of total tightening over the next 12 months that would see the policy rate peak near 14.25%, up from 13.5% in early November. October central government budget data will be reported Thursday, followed by consolidated budget data Friday.
Banco de Mexico releases its quarterly inflation report Wednesday. The bank then releases its minutes Thursday. At the last meeting November 14, the bank cut rates 25 bp to 10.25% and noted that “Looking ahead, the Board expects that the inflationary environment will allow further reference rate adjustments.” Governor Rodriguez confirmed that further easing is likely and added that larger cuts may be considered. Next meeting is December 19 and another 25 bp cut to 10.0% seems likely after mid-November CPI data came in lower than expected last week. Looking ahead, the swaps market is pricing in 125 bp of total easing over the next 12 months followed by another 25 bp over the subsequent 12 months that would see the policy rate bottom near 8.75%, down from 9.0% in early November.
Chile reports October real sector data Friday. Retail sales are expected at 2.0% y/y vs. 3.9% in September, IP is expected at 1.3% y/y vs. -0.3% in September, and manufacturing production is expected at 2.7% y/y vs. -1.1% in September. The economy basically stagnated in September and is unlikely to see much improvement in Q4 and so the central bank will remain under pressure to ease after it cut rates 25 bp to 5.25% last month. Next meeting is December 17 and another 25 bp cut to 5.0% seems likely. The swaps market is pricing in 50 bp of total easing over the next 12 months that would see the policy rate bottom near 4.75%.
EUROPE/MIDDLE EAST/AFRICA
Bank of Israel meets Monday and is expected to keep rates steady at 4.5%. At the last meeting October 9, the bank left rates steady at 4.5%. It was a hawkish hold as Governor Yaron said “The current interest rate level is sufficiently restrictive. However, we are data dependent and if [inflation] rises more than expected we may definitely raise interest rates.” Furthermore, the bank’s research department saw the policy rate at 4.5% in Q3 2025 vs. 4.25% in Q2 2025 at the July 8 meeting. The swaps market is pricing in steady rates over the next six months followed by 25 bp of easing over the subsequent six months.
Poland reports November CPI Friday. Headline is expected at 4.6% y/y vs. 5.0% in October. If so, it would be the first deceleration since March but would remain above the 1.5-3.5% target range. At the last policy meeting November 6, National Bank of Poland kept rates steady at 5.75% and MPC members were split about the timing of the next cut. Maslowska said H2 was likely, while Dabrowski said Q3 was likely vs. March previously. Wnorowski said he and the “vast majority” of the MPC believe rate cut discussions will begin in March, which was confirmed by similar comments from Kochalski, Kotecki, and Janczyk. Next meeting is December 4 and another hold seems likely. The swaps market is pricing in steady rates over the next three months followed by 50 bp of easing over the subsequent three months, another 50 bp over the subsequent six months, and another 100 bp over the subsequent 12 months that would see the policy rate bottom near 3.75%.
ASIA
Singapore reports October CPI data Monday. Headline is expected to fall two ticks to 1.8% y/y while core is expected at 2.5% y/y vs. 2.8% in September. If so, headline would be the lowest since March 2021. While the MAS does not have an explicit inflation target, low price pressures would allow it to loosen policy at its January meeting if the growth outlook deteriorates. At the last meeting October 14, the MAS kept policy unchanged but set up an eventual shift when it noted that “The risks to Singapore’s inflation outlook are more balanced compared to three months ago” and added that “there is significant uncertainty around the economic outlook, reflecting continuing risks in the external environment.” October IP will be reported Tuesday and is expected at 2.2% y/y vs. 9.8% in September.
Bank of Korea meets Thursday and is expected to keep rates steady at 3.25%. At the last meeting October 11, the Bank of Korea started the easing cycle with a 25 bp cut to 3.25% but there was one dissent in favor of steady rates. Governor Rhee said five board members saw steady rates over the next three months, while one was open to another cut. Since that meeting, the data have been coming in soft, but the weaker KRW argues for a pause. The swaps market sees 75 bp of total easing over the next 12 months that would see the policy rate bottom at 2.50%. October IP will be reported Friday and is expected at 2.0% y/y vs. -1.3% in September. November trade data will be reported Sunday local time. Exports are expected at 2.8% y/y vs. 4.6% in October and imports are expected at -2.1% y/y vs. 1.7% in October.
China reports official November PMIs Saturday local time. Manufacturing is expected to rise a tick to 50.2 while non-manufacturing is expected to rise two ticks to 50.4. If so, the composite PMI should rise a tick or two from 50.3 in October. Still, we cannot get excited about what is likely to be a short-term pickup in the economy. Further stimulus is likely to be needed even as policymakers avoid the structural reforms needed to address the aftermath of the property bubble. People’s Bank of China sets its 1-year MLF sometime this week. It is expected to remain steady at 2.0%.
