In Poland we look forward to the rate decision. We expect unchanged key rate at 5.75 %. We still like PLN very much long term, because Poland is very ambitious about joining the euro as soon as possible (likely in 2012). However short term we could see some profittaking and the central bank could make some dovish comments, which would lead to some pressure on PLN. We consider selling PLN, but stay neutral.
Yesterday South African Q1 GDP-data was published. GDP growth slowed to 4.0 % y/y from 4.6 % i Q4 2007. The figure was slightly below consensus (4.1 %). Despite the weak GDP data, we believe that the central bank will hike by further 50 basis points on 12 June, because inflation is still very high. Today inflation for April is published and the market expect another double digit number (10 % y/y), which will support our view about a hike in June. Despite a high carry (1 year interest rates is about 12 %) we do not like ZAR right now.
Growth is declining, inflation is still very high and on the top of that we have seen difficulties in the energy sector. And the latest news about attacks on emigrants from other African countries (56 dead) is of course first of all a human tragedy, and if it is not stopped it will stop investments in ZAR long term. We consider selling ZAR, but stay neutral. Looking at EM in general: After positive returns in April returns have been about zero in May. Looking forward much is depending on the global sentiment. The financial crisis is not in focus any more. Instead focus has turned towards economic data from the US.
The latest economic data from the USA has been better than expected. There is a lot of important USdata in the next couple of weeks (the highlight is obviously the job report on Friday 6th of June). The data could support the markets and start a new period with positive sentiment on EM.
Yesterday South African Q1 GDP-data was published. GDP growth slowed to 4.0 % y/y from 4.6 % i Q4 2007. The figure was slightly below consensus (4.1 %). Despite the weak GDP data, we believe that the central bank will hike by further 50 basis points on 12 June, because inflation is still very high. Today inflation for April is published and the market expect another double digit number (10 % y/y), which will support our view about a hike in June. Despite a high carry (1 year interest rates is about 12 %) we do not like ZAR right now.
Growth is declining, inflation is still very high and on the top of that we have seen difficulties in the energy sector. And the latest news about attacks on emigrants from other African countries (56 dead) is of course first of all a human tragedy, and if it is not stopped it will stop investments in ZAR long term. We consider selling ZAR, but stay neutral. Looking at EM in general: After positive returns in April returns have been about zero in May. Looking forward much is depending on the global sentiment. The financial crisis is not in focus any more. Instead focus has turned towards economic data from the US.
The latest economic data from the USA has been better than expected. There is a lot of important USdata in the next couple of weeks (the highlight is obviously the job report on Friday 6th of June). The data could support the markets and start a new period with positive sentiment on EM.