(from my colleagues Dr. Win Thin and Ilan Solot) 
 

EM starts the week on an uncertain footing. Commodity prices were off sharply until comments by Saudi Arabia lifted them, reversing the trend in commodity-sensitive assets. The dollar is also back on the rise, pressuring EM FX even as a December FED hike is now just about fully priced in. In South America, the victory of the market-friendly candidate in Argentina and better political winds in Brazil have also given the region some hope for the near term, which could help sentiment more broadly.

South Africa reports Q3 GDP Tuesday, and is expected to grow 1.3% y/y vs. 1.2% in Q2. The SARB rate hike last week will be another headwind on the economy, and comes on top of fiscal tightening too. We think risks to growth are on the downside. The big question is how much more the SARB can tighten in the coming months?

Turkey’s central bank meets Tuesday and is expected to keep rates steady at 7.5%. Unfortunately, President Erdogan is once again talking about monetary policy. After being surprisingly quiet during the election period, he is once again pressuring the central bank to ease, despite Turkey’s chronic inflation problem. He called for the bank the cut rates to closer to historical lows of 4.5%, from back in 2013. Risks to central bank independence in Turkey have been a negative factor in market confidence for some time, and it doesn’t look to be getting any better.

Mexico reports mid-November CPI Tuesday, and is expected to rise 2.48% y/y. October trade will be reported Friday. Q3 GDP came in stronger than expected, up 2.6% y/y vs. 2.4% consensus and a revised 2.3% (was 2.2%) in Q2. Some may look for a possible Banxico rate hike at the next meeting December 17, which happens to be a day after the FOMC meeting and likely Fed lift-off. We think it’s unlikely, as officials seem to be tilting a little more dovish lately. More seem to want to see the impact of a Fed hike before deciding on Mexico rates.