Halister News

(Bloomberg) -- EM investors may be swayed by the FOMC decision this month as much as local factors as outperformance of EM assets post-Brexit may be at risk if Fed surprises with a rate increase. Politics will continue to hog the limelight in Brazil, Turkey and South Africa while EM central banks policy meetings will provide an insight into initial response to U.S. rates outlook.

• MAIN RISKS
• CEEMEA
• U.S. monetary policy outlook remains the key driver with FOMC meeting eyed; Rabobank sees any surprise hike in Sept. or Oct. as a source of risk to any constructive view on CEEMEA
• Locally, political risk is on the rise in South Africa where any departure of finance minister Gordhan may pave the way for further ZAR weakness
• Turkish lira ended August with ~1% of gains against USD, yet the outlook is uncertain amid geopolitical risks given the military presence in Syria and the country’s negotiations with EU over the refugee accord
• Turkey’s Recep Tayyip Erdogan and U.S. President Barack Obama will meet at G-20 meeting in China for the first time since Erdogan suppressed an attempted coup in July
• In Hungary, the central bank meets on Sept. 20 and market is bracing for more details about 3-month facility deposits which will be capped from October; if the limits imposed are large, it could be short-term negative for HUF, ING says

• LATAM
• Brazil’s impeachment process ended with Rousseff ousted and Temer confirmed in post until 2018; Congress debate on measures tied to fiscal adjustment will be back on traders’ radar and any related headlines are likely to be main potential BRL catalyst this month
  • If fiscal reforms advance, Brazilian real may test fresh YTD lows
• Colombia Central Bank confirmed most traders view to leave key rate unchanged at 7.75% at last meeting; fresh inflation data on Sept. 6 will be closely eyed to assess risk the central bank may resume its tightening cycle

• ASIA
• Rupee may strengthen near term as new RBI governor Urjit Patel, seen as an inflation fighter by some, takes the helm. Charts suggest USD/INR is close to making a decisive break below 200-day moving average, which if confirmed, could trigger a cycle of rupee strength into fourth quarter
• Malaysia’s 5-year govt bond yields could be more influenced this month by a tilt in U.S. rates than domestic data, even with a BNM decision due on Sept. 7. Treasury yields began turning higher in early July, helping to underpin Malaysian yields around 3.15%, levels last seen in 2013; click here for chart on relationship between normalized returns for 5- year Malaysia and U.S. bonds

• CALENDAR (based on local dates)
• Sept. 2: Singapore PMI
• Sept. 4: G-20 leaders meeting starts in Hangzhou, China
• Sept. 5: Turkey CPI; Colombia CPI; Chile IMACEC
• Sept. 6: Malaysia foreign reserves; South Africa GDP; Brazil minutes
• Sept. 7: China foreign reserves; Malaysia trade balance and central bank meeting; Taiwan exports; Poland base rate announcement
• Sept. 8: China trade balance; Mexico CPI; Chile CPI; Peru rate decision
• Sept. 9: Korea central bank meeting; Malaysia IP; China CPI, PPI; Poland sovereign debt to be rated by Moody’s; Brazil CPI
• Sept. 12: India CPI and IP
• Sept. 13: China IP and Retail Sales
• Sept. 14: Thailand central bank meeting
• Sept. 15: Indonesia trade balance; Colombia Minutes; Chile Rate decision
• Sept. 16: Singapore exports; Russia sovereign debt to be rated by S&P; Bank of Russia monetary policy decision
• Sept. 20: Hungary central bank meeting
• Sept. 21: Malaysia CPI
• Sept. 21-29: Taiwan central bank meeting
• Sept. 22: Malaysia foreign reserves; Indonesia, Philippines, Turkey, South Africa central banks meet
• Sept. 23: Singapore CPI
• Sept. 26: Mexico IGAE
• Sept. 29: Mexico rate decision
• Sept. 30: Korea IP; Turkey trade balance; Colombia rate decision; Brazil primary budget balance
• NOTE: Davison Santana and Mark Cranfield are FX strategists who write for First Word. The observations they make are their own and not intended as investment advice.