HALISTER1: EM RISK TIMELINE: Central Banks, Credit Ratings, Brazil Deficit

EM RISK TIMELINE: Central Banks, Credit Ratings, Brazil Deficit

(Bloomberg) -- Central bank decisions in CEEMA and Asia are in focus for signs of an easing bias following Brexit vote, while Brazil is schedule to announce its 2017 fiscal goal.
  • MAIN RISKS
  • CEEMEA
    • Focus will be on the central banks’ decisions as investors expect a more accommodative stance in post- Brexit era while Fed is likely out of the game this year with the hiking cycle
    • Fitch due to review Poland’s ratings later this month and the outlook may be lowered to negative from stable, according to Morgan Stanley; Poland affirmed by S&P Global Ratings with negative outlook on July 1
  • LATAM
    • Brazil Central Bank resumed offering of reverse FX swaps July 1st after staying out of mkt since mid-May; BCB president Ilan Goldfajn said that he sees conditions to reduce bank’s swap holdings, which make the auctions a significant intraday driver
    • Brazil FinMin Meirelles said 2017 fiscal goal to be announced this week; traders may want to see significantly lower than BRL170.5b target deficit to refrain from punishing BZ assets
    • Investors’ patience with fiscal woes may vanish completely after Rousseff’s final impeachment vote in Senate; session seen happening by the end of Aug., but any indication of change in calendar may start to impact as soon as July
    • Banxico’s controversial rate move last week may continue to spur debate and any official communication will be closely eyed to gauge chances of another rate hike next month to curb MXN decline
  • ASIA
    • USD/JPY vulnerable to extending decline amid risk-off sentiment following Brexit result. FX pair was unable to sustain a rally despite APAC risk-on sentiment last week; any market expectations for additional QQE easing at BOJ’s meeting later this month may support USD/JPY, particularly as the stronger yen adds headwinds as the central bank struggles to reach 2% inflation target
    • AUD/USD may grind higher if risk-on sentiment is maintained ahead of 2Q CPI trimmed mean data on July 27. A reading below 1Q level of 1.7% y/y could increase probability of a rate cut by RBA at its August meeting. RBA is forecast to remain on hold in July while they monitor affects of Brexit and await the national elections results which shows risks of a hung parliament.
  • CALENDAR (based on local dates)
  • July 4: Turkey CPI; Chile minutes
  • July 5: Malaysia foreign reserves; Colombia CPI; Chile IMACEC
  • July 6: Poland central bank decision
  • July 7: China foreign reserves; Hungarian industrial production; Mexico CPI
  • July 7-14: Singapore 2Q GDP
  • July 8: Taiwan exports; Moody’s to review Hungary rating; Colombia minutes; Chile CPI; Brazil CPI
  • July 10: China CPI, PPI
  • July 12: India IP; Malaysia IP
  • July 13: China trade balance; Malaysia central bank meeting; Hungarian central bank minutes
  • July 14: Korea central bank meeting; Chile rate decision; Mexico minutes
  • July 15: China IP and 2Q GDP; Fitch to review Poland rating
  • July 18: Singapore non-oil exports
  • July 19: Turkey central bank decision
  • July 20: Malaysia CPI; Brazil rate decision
  • July 21: Indonesia central bank meeting; South Africa central bank decision
  • July 22: Malaysia foreign reserves; S&P to review Czech Republic rating
  • July 25: Singapore CPI
  • July 26: Korea 2Q GDP; Hungarian central bank decision
  • July 29: Korea IP; Taiwan 2Q GDP; Russian central bank decision; Colombia rate decision
  • NOTE: David Finnerty, Davison Santana are FX strategists who writes for First Word. The observations he makes are his own and are not intended as investment advice.
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Henrique Meirelles (Brazil Secretaria do Tesouro National)
Ilan Goldfajn (Banco Central do Brasil)

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