Emerging Market Preview

(from my colleagues Dr. Win Thin and Ilan Solot)

Mexico reports October consumer confidence later today and is expected at 92.8 vs. 94.1 in September. Retail sales have been very weak recently as confidence weakens. Banco de Mexico releases its quarterly inflation report on Wednesday, while October CPI will be reported on Thursday and expected to rise 3.34% y/y vs. 3.39% in September. The central bank signaled after its last 25 bp cut that further easing was undesirable, but this will clearly be data dependent. For USD/MXN, support is now seen near 13.00 and then 12.80, while resistance is seen near 13.20 and then 13.40-45.

Poland central bank meets Wednesday and is expected to keep rates steady at 2.5%. Economic data have shown modest improvement lately, giving the central bank cover to keep policy on hold so see how the data continue to develop. For EUR/PLN, support seen near 4.15 while resistance is seen near 4.20 and then 4.25.

On Thursday or Friday, we get October trade data from China. Exports are expected to rise 1.3% y/y, while imports are expected to rise 7.4%. Over the weekend, China then reports October CPI and PPI, as well as IP and retail sales. New loan data will likely come out the next week. The modest improvement in the PMIs coupled with strong Korean trade data likely has the market looking for continued improvement in the numbers. USD/CNY rose as a result of the broad dollar rally last week, and attempted today to break back above 6.10.

Malaysia central bank meets Thursday and is expected to keep rates steady at 3.0%. Friday, it reports September trade data. The economic data have shown modest improvement lately, but tighter fiscal policy will act as a headwind on growth. For USD/MYR, support seen near 3.15 while resistance seen near 3.20 and then 3.25.

Czech central bank meets Thursday and is expected to keep policy unchanged. On Tuesday, Czech retail sales for September will be reported, and are expected to rise 4% y/y vs. -0.3% in August. On Wednesday, it reports September IP, construction output, and trade. For EUR/CZK, support seen nears 25.80 and then 25.60, while resistance seen near 26.00 and then 26.20.

Brazil reports October IPCA inflation on Thursday, and is expected to remain steady at 5.9% y/y. FIPE inflation for October reported earlier Monday was slightly higher than expected. The next COPOM meeting November 26/27 is expected to see another 50 bp rate hike to 10%, and expectations are building for one last 25 bp hike in early 2014. For USD/BRL, support seen near 2.20 while resistance seen near 2.30. 

Peru central bank meets Thursday and is expected to keep rates steady at 4.25%. We still think an easing cycle is likely to start in early 2014, as Peru faces similar headwinds to Chile, which started its easing cycle in October with a 25 bp cut. For USD/PEN, support seen near 2.75 while resistance seen near 2.80.

(irregular updates will continue this week as the extended business trip to Asia continues)