Halister News

(Bloomberg) -- EM investors enter fourth quarter with data, U.S. elections and geopolitics in focus. India’s attack on terrorist camps in Pakistan introduces a sobering note for financial markets already nervous with North Korea’s bluster.

• MAIN RISKS
• CEEMA
  • As the U.S. elections approach on November 8, investors will take a close look at the next presidential debates which may set the tone for USD and emerging market currencies
  • Bullish conviction in Russian ruble remains high among market participants after the hawkish rhetoric from the central bank of Russia which meets again at the end of October; the agreement reached by OPEC is also playing in favor of Russia’s currency, even as the execution of the deal leaves the market skeptical
  • Turkish lira is the only under-performer of CEEMEA basket; some analysts, including Morgan Stanley, are waiting for better levels to reload bullish positions on TRY and bonds; central bank meets on October 20

• LATAM
  • Polls and debates on U.S. elections, more particularly, Trump’s campaign performance as vote approaches are likely to continue to be key for MXN; peso sees the highest 2-month implied volatility among major FX to account for election’s risk
    • Banxico hiked another 50 bps on Sept. 29 attempting to curb currency depreciation due to “Trump’s risk” as peso near its record low, showing more than 10% decline this year
  • BRL traders will eye Brazil Central Bank decision Oct. 19 as well as the advance of fiscal reforms; If spending cap vote approved on 1st round in Lower House Oct. 11 as expected, BCB more likely to start an easing cycle
  • Further development of surprising OPEC agreement likely to be the most significant catalyst for COP; banks remain skeptical with the actual execution of the deal, but some see room for oil to rise as much as $10/barrel if pact evolves

• ASIA
  • Volatility may increase for USD/CNH after China’s week of National Day holidays; some investors see yuan inclusion in SDR allowing more flexibility for intraday FX trading
  • Singapore dollar may extend post-Brexit trading range if central bank holds policy steady at its semi-annual meeting in October; August core CPI at 1.0% posting its seventh month above its 12-month average suggests inflation expectations may be turning higher; click here for chart

• CALENDAR (based on local dates)
• Oct. 1: China PMI; Korea exports
• Oct. 2: Hungarian referendum on EU migrant quotas
• Oct. 3: Singapore PMI
• Oct. 4: India central bank meeting
• Oct. 5: Poland central bank decision, Colombia CPI; Chile IMACEC
• Oct. 7: China foreign reserves; Malaysia trade balance and foreign reserves; Taiwan exports; U.S. nonfarm payrolls; Brazil CPI; Mexico CPI; Chile CPI
• Oct. 10-14: 3Q GDP and central bank meeting; second U.S. presidential debate; Brazil 1st round of spending cap bill
• Oct. 13: China trade balance; South Korea central bank meeting; Mexico minutes
• Oct. 14: China CPI, PPI, Colombia minutes
• Oct. 17: Singapore exports
• Oct. 18: Chile rate decision
• Oct. 19: China 3Q GDP, IP, retail sales; Malaysia CPI; third U.S. presidential debate; Brazil rate Decision
• Oct. 20: Bank Indonesia meeting; Turkey central bank decision
• Oct. 21: Malaysia foreign reserves;
• Oct. 24: Singapore CPI
• Oct. 25: South Korea 3Q GDP; Hungary central bank decision; Brazil Minutes
• Oct. 28: Russia central bank meeting
• Oct. 31: Taiwan 3Q GDP; Thailand current account; Mexico GDP. Colombia rate decision
• 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.