Analysts at TD Securities offered their outlook for the key events coming up today.
Key Quotes:
“AUD The trade surplus for April is expected to remain healthy at +$A1.2b (mkt +$A1b) although imports at +2.4%/m likely outpaced export growth of +1.5%/m (taking guidance from Chinese trade with Australia released a few weeks ago). Buoyant iron ore prices and volumes more recently suggest bigger surpluses are likely for May and June.”
“EUR Markets are looking for German factory orders to post a 0.6% m/m gain in April, partially recovering from the -0.9% drop in March.”
“NOK We look for a modest 0.3% m/m gain in manufacturing production for April.”
“TRY We expect the CBRT to further tighten monetary policy by 100bps. In particular, we expect the 1w Repo Rate to be hiked to 17.5%, O/N Lending Rate to 19% and O/N Borrowing Rate to 16%. The Late Liquidity Window rate, instead, should remain unchanged at 19.50%. The consensus is split between expectations for a hold and tightening, with a slight majority in favor of the former. Amongst the reasons that justify a hike today, inflation is the most evident one. May CPI accelerated to 12.15% Y/Y from a prior 10.85% mostly on higher oil prices and FX pass-through. Furthermore, ahead of the 24 June elections, the CBRT will likely want to avoid that a lira sell-off reflects negatively on the government and, thus, higher rates will help stabilize USDTRY. This argues for some degree of tightening tough it’s difficult to say how much exactly. With 100bps of tightening, USDTRY is likely to rally and consolidate stably below 4.60. With no tightening at all, USDTRY could move above that mark. However, recent comments from the government read like partial backpedalling from last week’s commitment to hike on higher inflation, and skew the risks for our forecasts firmly to the downside.”
“CAD The Bank of Canada will publish its Financial Stability Review at 10:30 ET amid an otherwise empty data calendar. The semi-annual report will give an update on household debt dynamics, likely with a focus on mortgage renewals, and be followed by a press conference with Governor Poloz at 11:15 ET. Ontario elections also take place on Thursday, with polls scheduled to close at 21:00 ET, and the latest polling remains indicative of a PC majority.”
“USD Initial jobless claims are the lone data release and the market looks for 220k, little changed from the prior week.”
“MXN The consensus expects Mexico’s March CPI to come in at 4.46% Y/Y, a tad lower compared to the prior 4.55%. Insofar as it relates to Banxico’s trajectory, we take the CPI decline as a continuation of a trajectory that should see convergence to 3% in late Q1 or early Q2 of 2019. However, for Banxico’s policy path it is NAFTA and the election that remains most important via the direct effect on the peso and any subsequent inflation pass-through from any potential deep depreciation. Should relative MXN stability ultimately prevail, we see the start of the easing cycle in October.”
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