Emerging currencies positive
Amidst all the noise, subdued inflation and solid global growth are good for selected emerging-market currencies: MXN, THB, INR, IDR and ZAR should be bought on the dips.
Trade-war fears eased on Chinese President Xi Jinping’s conciliatory, optimistic remarks at the Boao Forum for Asia. Global stocks rebounded as US President Donald Trump acknowledged the remarks positively. But markets are still jittery: USD/RUB highlights this, clearing 64.20 in early trading. In general, forex markets remain choppy and difficult to read.
Today will see various announcements: UK manufacturing data, the US consumer price index and the US Federal Reserve’s minutes of its Open Market Committee. US CPI inflation is expected to rise, with the core rate jumping to 2.1%, keeping USD contained. The FOMC March minutes will give insight into the Fed’s choice of three or four rate hikes for 2018.
Italy’s uncertainty
After March elections and the slow process of forming a government, the Italian economy is showing signs of weakness. A slowdown in February’s producer price index and industrial production month-to-month of 0.30% and -0.50% (prior: 0.80% and -1.80%) underline a decline in manufacturing morale, due to current political uncertainty. A major laggard is consumer goods (-2.40%; prior: +0.10%), but energy turned positive (+8.10%; prior: -6.90%). March manufacturing and economic confidence are lower at 109.1 and 106 (prior: 110.4 and 108.5), a pessimistic view on growth.
However, seen broadly, Italy’s economy remains stable, with an unemployment at a six-year low (10.90% in February), inflation accelerating (March’s consumer price index year-to-year +1.10%) and improving consumer confidence (117.50 as of March 2018, its highest since 31 January 2016). This supports our positive view of the Eurozone. Gaining 0.85% this week, EUR/USD bullishness started last Friday continues, bouncing from a 1.2215 low and heading to the 1.2390 range in the short-term (200-day moving average: 1.1963).
