Saturday, May 25 2019 | ASIA TODAY INTERNATIONAL - Reporting the Business that Matters in Asia
Updated: 1 hour 52 min ago
Firm policies helped to stabilize Turkish Financial Markets and the economy is re-balancing fast. The economic activity adjustment gained momentum at the end of 2018 but there are early signs of bottoming-out. We expect policymakers stick to sound policies.
The balance of risks has deteriorated on the back of growth concerns in the US and China. A global trade war continues to be relevant despite the current truce, while a resurface of debt tensions in the Eurozone should not be ruled out yet due to high political instability. On a positive note, the U-turn in the Fed’s stance reduces the likelihood of overshooting.
Of the remittances received by Mexico in 2018, 94.1% came from the U.S., 97.7% were sent by electronic means and 71.7% were disbursed in non-banking institutions. 7 states accounted for half of the remittances that arrived in the country: Michoacán (US$3,393 millon), Jalisco (3,288), Guanajuato (3,046), Mexico (1,903), Oaxaca (1,731), Puebla (1,699) and Guerrero (1,615).
Fall in inflation along with lower risks takes further hikes in the near-term off the table. Balance of risks to inflation improved in the intermeeting period with the recent rally in the MXN combined with a larger-than-expected fall in inflation in the first half of January. We expect the next move in the monetary policy rate to be a cut, but not until later in the year.
Markets continued to show minor movements as yesterday’s State of the Union address in the US did not bring any insight into the border with Mexico, the main issue to avoid a new shutdown. On another front, the US-China trade relations seems to be evolving positively as he said that a deal is possible while, according to US Treasury Secretary, US-China talks will continue
The currency crisis of 2018 derailed both the gradual fiscal approach and the inflation targets, and drastically changed the 2019 outlook. The key questions are whether there be a turnaround in activity and inflation, and who the next President will be.
Financial markets remained calm with all eyes set on Trump’s State of the Union address later today as investors seek some flexibility over the border wall stance. Also, more details about upcoming meetings for the US with China and North Korea could be hinted at.
Venezuela’s opposition leader Guaidó declared himself as the interim president. U.S. sanctioned Maduro administration and recognized his Presidency as well as some EU members. Meanwhile, geopolitical developments in Asia are positive as China and U.S. are in trade talks. U.S. came with a plan for a safe-zone in northern Syria, but involved parties, have different concerns.
Calm in markets after the past eventful week in which, strong US jobs data, optimism about the US-China trade talks and positive earnings reports added to the Fed’s dovish tone to boost risk assets. After the delay of market expectation for further rate hikes by main Central Banks (especially the FED), the release of fresh economic data will be key from now on.
CPI rose by 1.06% in January parallel to expectations (1%, Market&BBVA Research). Thus, annual inflation stayed at 20.35%. Higher-than-expected minimum wage rise, potential price hike in cigarettes and seasonally higher food prices still play an important role, keeping the likelihood to have the headline above 20% till 2H19. We maintain year-end inflation estimate at 16%.
The political situation in the UK continues to be complicated after the Parliament's firm rejection of the agreement negotiated by Prime Minister May with the European Union. Since then, the Government still does not have sufficient support, especially due to the backstop for Ireland, but it maintains its red lines both in the agreement as well as in the exit strategy.