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EM STRATEGY | DAILY Summary - 08 February 2018

Core Content Overview

This document provides a summary of key economic and monetary policy developments in Emerging Markets (EM) on 08 February 2018, with a focus on Central Bank decisions, inflation data, and currency movements. It is produced by BNP Paribas Global Markets Research teams and outlines strategic insights for investors.

Key Market Updates

United States

• A budget deal was announced to roll back the impact of scheduled spending cuts over the next two years.
• The deal funds the government until 23 March and suspends the debt ceiling until early 2019.
• The document suggests the deal is likely to pass through both houses of Congress quickly.

Asia

• The Chinese Yuan (CNY) rose from 6.29 to 6.35 against the USD, driven by profit taking ahead of the Chinese New Year.
• Asian equities were slightly higher, while CDS spreads widened by 2bp.
• The central bank of the Philippines (BSP) held rates unchanged but warned of upside inflation risk due to oil price movements.

Latin America

• Mexico:
  • Bi-weekly January CPI data will be released in the morning, followed by a policy rate decision in the afternoon.
  • The document expects Banxico to leave rates unchanged due to moderated inflation, a rising MXN, and a challenging outlook.
  • However, the decision is expected to be a close call due to the central bank's hawkish rhetoric.
• Brazil:
  • The central bank (BCB) cut rates by 25bp to 6.75%, as widely anticipated.
  • The policy statement suggests the easing cycle may be complete, with rates expected to end 2018 at 6.75% and 2019 at 8.0%.
  • This is well below the yield curve, indicating potential market conditions.

Turkey

• The January cash-based budget deficit widened to TRY 1.5bn, a sharp contrast to the TRY 9.5bn surplus a year ago.
• This signals a deteriorating fiscal outlook for the country.
• Further details are available in the Turkey Morning Meeting Notes.

Egypt

• Inflation data fell to 17.1% from 21.9%, now below the policy rate.
• This has increased expectations for a rate cut at the central bank's (CBE) next meeting.
• If implemented, this would be the first rate cut since the 2016 hiking cycle, which raised rates from below 10% to 18.75%.

India

• The Reserve Bank of India (RBI) kept policy rates on hold as expected.
• The central bank's "neutral" stance led to calm in bond markets.
• One of six committee members voted for a rate hike, suggesting a potential shift towards tightening in H2.
• The document expects two 25bp hikes in the second half of the year, taking the repo rate to 6.50% by year-end.

Strategic Contacts

Legal and Disclaimer Information

• This document is non-independent research and is intended for professional clients and eligible counterparties.
• It is not investment research for MiFID II purposes and may be subject to conflicts of interest.
• The information is based on public sources and may not have been independently verified.
• BNPP disclaims any liability for inaccuracies or omissions in the document.
• The document may contain performance data based on back-testing, which is for illustrative purposes only.
• It does not constitute an offer to sell or issue securities, nor should it be relied upon as authoritative.
• It is for informational purposes only and may be subject to change or discontinuation.

Additional Information

• The document is produced by BNP Paribas London Branch, Banco BNP Paribas Brasil S.A., and BNP Paribas Singapore Branch.
• For further details on specific markets, refer to the referenced reports:
  • Brazil's rate cuts: That's all, folks!
  • India: RBI strikes all the right notes
• The document is available on the BNP Paribas Global Markets Website: www.globalmarkets.bnpparibas.com