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

This is set to be one of the most important weeks of the year. EM is likely to take a backseat between the ECB monetary policy decision, the OPEC meeting and the US jobs report. That said, there are several potential sources of idiosyncratic risk to key an eye on. There could be more headline risks from the Russia-Turkey situation. Some think that the leader of Brazilian lower house may bring forward the impeachment process this week, given that he was implicated with yet another corruption case. And the volatility in Chinese stocks seems to be rising again after a fall of 5.5% on Friday, and a near 4% intraday move overnight, which could spill-over into other Asia markets.

Korea reports November CPI and trade Tuesday. CPI is expected to rise 0.9% y/y, while exports are expected at -8.9% y/y and imports at -15%y/y. Inflation is well below the 2.5-3.5% target range, but the BOK has been on hold since the last 25 bp cut to 1.5% back in June. The next policy meeting is December 10. October current account data will be reported Wednesday.

China reports both official and Caixin November PMI Tuesday. The former is expected to rise a tick to 49.9, while the latter is expected to remain steady at 48.3. The economy appears to be stabilizing, but we expect further easing by the PBOC.

Indonesia reports November CPI Tuesday. It rose 6.25% in October, the lowest since November 2014. Inflation is still above the 3-5% target range, but is moving towards it enough to have Bank Indonesia cut reserve requirements at its last meeting. The next policy meeting is December 17. Outright cuts in the policy rate are likely in 2016 if the inflation trajectory continues.

Thailand reports November CPI Tuesday, and is expected at -0.7% y/y vs. -0.8% in October. This is well below the 1-4% target range, yet the BOT has been on hold since the last 25 bp cut to 1.5% back in April. The next policy meeting is December 16. For now, the central bank is letting fiscal policy and the exchange rate do the heavy lifting in terms of stimulus. This is especially so as the impact of the El Nino phenomenon is still to be determined.

Reserve Bank of India meets Tuesday and is expected to keep the repo rate steady at 6.75%. The central bank cut rates at its last meeting in September by a larger than expected 50 bp. The RBI has so far kept to its pattern of cutting rates at every other meeting in 2015. However, CPI inflation is rising again and may keep the bank on hold in early 2016.CPI rose 5% y/y in October, and is moving closer to the top of the 2-6% target range.   

Mexico reports November PMI Tuesday. Domestic consumption has been firm recently, helping to offset the drag from lower oil prices. However, price pressures remain low and we see no need for the central bank to hike rates December 17, no matter what the Fed does the day before. 

Hungary central bank minutes will be released Wednesday. The minutes should provide some color on the bank’s willingness to implement further easing. CPI rose 0.1% y/y in October, well below the 3% target but back to positive after September’s -0.4% y/y reading. Deflation risks remain in place, which is why the central bank is moving to unconventional measures. The next policy meeting is December 15. Hungary then reports October retail sales Thursday, and are expected to rise 4.6% y/y vs. 5.1% in September.

Turkey reports November CPI Thursday, and is expected to rise 7.84% y/y vs. 7.58% in October. After keeping quiet most of this year, the government has started to criticize the central bank again and to call for rate cuts. This despite rising inflation and a weak lira. For now, we expect the bank to resist these calls, but it’s unclear how long Basci can last in the face of growing pressure by Erdogan. The next policy meeting is December 22.

Czech Republic reports October retail sales Friday, and are expected to rise 5.5% y/y vs. 7% in September. Deflation risks remain strong, even though the real economy is still recovering. If the outlook softens in 2016, we could see an adjustment to the EUR/CZK floor but for now, steady policy is likely. The next policy meeting is December 16.