(from my colleague Dr. Win Thin)

EM FX closed last week on a firm note, as the stronger than expected US jobs gain was mitigated by lower than expected average hourly earnings. Still, we believe that global liquidity conditions will continue to move against EM, as the Fed continues tightening and others join in. This week, BOC may be the first of the others to hike rates.

Meanwhile, EM inflation readings this week are expected to remain low, underscoring that EM monetary policy is unlikely to be tightened anytime soon. That should lead to narrower interest rate differentials between DM and EM, which in turn should keep downward pressure on EM FX.

China reports June CPI and PPI Monday. The former is expected to rise 1.6% y/y and the latter by 5.5% y/y. New loan and money supply data will be reported during the week, but no data has been set. June trade will be reported Thursday, with exports expected to rise 9.0% y/y and imports by 14.0% y/y.

Turkey reports May IP Monday, which is expected to rise 5.0% y/y vs. 6.7% in April. It then reports May current account data Thursday, with the deficit expected at -$5 bln. If so, the 12-month total would widen to -$35.1 bln, the largest since October 2015. The external accounts are worsening just as global liquidity is tightening, which should put downward pressure on the lira.

Bank of Israel meets Monday and is expected to keep rates steady at 0.10%. Israel then reports June CPI Friday, which is expected to rise 0.3% y/y vs. 0.8% in May. If so, that would be the lowest rate since January and further below the 1-3% target range. For now, the preferred policy lever is a weaker shekel.  

Hungary reports June CPI Tuesday, which is expected to rise 1.9% y/y vs. 2.1% in May. If so, that would be the lowest rate since December and back below the 2-4% target range. No wonder the central bank was comfortable easing again at its June meeting. Next policy meeting is July 18, no changes expected then.