EM FX was mostly firmer last week as the dollar saw broad-based losses. CLP, MXN, and COP outperformed while TRY, INR, and ARS underperformed. With the dollar likely to remain under pressure this week, EM FX should post further gains. That said, the global backdrop of slow growth and tight liquidity is not supportive of risk assets and so the gains may ultimately be limited.

AMERICAS

Chile reports October trade data Tuesday. October CPI will be reported Wednesday, with headline expected to remain steady at 5.1% y/y. If so, inflation would remain well above the 2-4% target range. The central bank delivered a hawkish surprise at the last meeting October 26 and cut rates 50 bp to 9.0% vs. 75 bp expected. It also suspended its FX purchase program. Next policy meeting is December 19 and much will depend on how the peso is trading then. If it remains firm, than a larger 75-100 bp hike seems likely.

Brazil reports September current account and FDI data Monday. Consolidated budget and retail sales data will be reported Wednesday. Sales are expected at 2.7% y/y vs. 2.3% in August. October IPCA inflation will be reported Friday, with headline expected at 4.88% y/y vs. 5.19% in September. If so, it would be the first deceleration since June but still above the 1.75-4.75% target range. High base effects should see the y/y rate return to the target range in November or December. Next COPOM meeting is December 13 and another 50 bp cut to 11.75% is expected.

Colombia reports October CPI Wednesday. Headline is expected at 10.62% y/y vs. 10.99% in September. If so, it would be the lowest since July 2022 but still well above the 2-4% target range. The central bank just left rates steady at 13.25% last week by a 5-2 vote, with the dissents in favor of starting the easing cycle with a 25 bp rate cut. The bank said “The majority of the board considers that, based on the available information, it still isn’t opportune to start a process of interest rate reduction, and that it is appropriate to wait for conditions that give greater confidence about the sustainability of this process.” Next policy meeting is December 19. If inflation continues to fall, a rate cut then is possible.

Mexico reports October CPI Thursday. Headline is expected at 4.28% y/y vs. 4.45% in September, while core is expected at 5.49% y/y vs. 5.76% in September. If so, headline would be the lowest since February 2021 and nearing the 2-4% target range. Banco de Mexico meets later Thursday and is expected to keep rates steady at 11.25%. The swaps market is pricing in steady rates over the next three months followed by 25 bp of easing over the subsequent three months. September IP will be reported Friday and is expected at 4.0% y/y vs. 5.2% in August.

Peru central bank meets Thursday and is expected to cut rates 25 bp to 7.0%. At the last meeting October 5, the bank cut rates 25 bp for the second straight meeting but warned that “This decision doesn’t necessarily imply a cycle of successive reductions in the interest rate. The board reaffirms its commitment to taking the necessary action to ensure that inflation returns to its target range over the forecast horizon.” Since then, October CPI came in much lower than expected. Bloomberg consensus sees a year-end rate of 6.75%, 6.0% at the end of Q1, and 5.25% at the end of Q2.

EUROPE/MIDDLE EAST/AFRICA

Bank of Israel releases the minutes from the October 23 meeting Monday. At that meeting, the bank kept rates steady at 4.75%. It was the first meeting since the attack and the bank warned that a wider war would affect its economic forecasts. As it was, the bank cut its 2023 growth forecast to 2.3% vs. 3.0% previously and its 2024 forecast to 2.8% vs. 3.0% previously and added that this scenario is based on the assumption that “the war will be concentrated on the southern front during the fourth quarter of the year.” The swaps market is pricing in 25 bp of easing over the next three months followed by another 25 bp over the subsequent three months.

Czech Republic reports September industrial and construction output and trade data Monday. IP is expected at -5.4% y/y vs. -1.7% in August. Retail sales will be reported Tuesday. Sales ex-autos are expected at -3.7% y/y vs. -2.8% in August. October CPI will be reported Friday, with headline expected at 8.4% y/y vs. 6.9% in September. If so, it would be the first acceleration since January and would move further away from the 1-3% target range. No wonder the Czech National Bank just delivered a hawkish hold last week when a 25 bp cut to 6.75% was expected. Governor Michl said a weaker koruna has partially eased monetary conditions and that the core CPI outlook was a key argument for standing pat. He said initial rate cuts will be small and gradual, adding that both cut and hold are options for the December 21 meeting. The swaps market is pricing in 75 bp of easing over the next three months, which seems way too aggressive given the bank’s cautious stance.

Hungary reports September IP Tuesday. IP is expected at -6.4% y/y vs. -6.1% in August. Retail sales and trade will be reported Wednesday. Central bank minutes will also be released Wednesday. At the October 24 meeting, the bank delivered a dovish surprise and cut the base rate 75 bp to 12.25% vs. 50 bp expected. October CPI will be reported Friday, with headline expected at 10.4% y/y vs. 12.2% in September. If so, it would be the lowest since April 2022 but still well above the 2-4% target range. Next policy meeting is November 21 and a 50 bp cut seems likely after the bank signaled a slower pace of easing. The swaps market is pricing in 125 bp of total easing over the next three months.

National Bank of Poland meets Wednesday and is expected to cut rates 25 bp to 5.5%. However, about a fifth of the 34 analysts polled by Bloomberg look for no change. Minutes from the October 4 meeting will be released Friday. At that meeting, the bank slowed its pace of easing to 25 bp after the previous 75 bp cut September 6 led to significant zloty weakness. As a result of the increased cautiousness, the swaps market is pricing in only 75 bp of total easing over the next six months.

ASIA

Thailand reports October CPI Monday. Headline is expected at 0.10% y/y vs. 0.30% in September, while core is expected at 0.60% y/y vs. 0.63% in September. If so, headline would be the lowest since August 2021. The Bank of Thailand delivered a hawkish surprise at the last meeting September 27 and hiked rates 25 bp to 2.5% vs. no change expected. However, the bank hinted that the tightening cycle has ended by omitting any reference to further hikes. Next meeting is November 29 and no change is expected then.

Philippines reports October CPI and September trade data Tuesday. Headline is expected at 5.6% y/y vs. 6.1% in September. If so, it would be the first deceleration since July but would remain well above the 2-4% target range. The central bank just delivered a surprise intra-meeting 25 bp hike to 6.5% October 26 in order to help support the peso. Next scheduled meeting is November 16 and if the peso continues to firm, no change is expected then. Q3 GDP data will be reported Thursday. Growth is expected at 4.8% y/y vs. 4.3% in Q2. If so, it would be the first acceleration since Q3 2022.

China reports October trade data Tuesday. Exports are expected at -2.9% y/y vs. -6.2% in September, while imports are expected at -4.5% y/y vs. -6.3% in September. CPI and PPI will be reported Thursday. CPI is expected at -0.2% y/y vs. 0.0% in September, while PPI is expected at -2.8% y/y vs. -2.5% in September. The economy is likely to continue struggling with deflation well into next year, as modest stimulus measures taken so far are already starting to wear off.