Last week, most EMEA currencies were supported by the dovish take of the comments by Fed Chair Jerome Powell, who said that the Fed funds rate was "just below" neutral. But the ruble underperformed in the aftermath of the November 25 incident, in which Russian border ships captured Ukrainian military vessels off the Crimean coast, and Ukrainian President Petro Poroshenko's subsequent introduction of martial law. We see potential for most currencies' appreciation in the coming week as we expect the U.S. November ISM manufacturing, ISM non-manufacturing and ADP readings to undershoot the consensus forecasts of 57.6, 59.1 and 195k, respectively.
In Poland, we expect the reference rate to be held at 1.50% at the NBP's December 4-5 meeting and think that the rhetoric by some MPC members is likely to become even more dovish in the aftermath of the lower-than-expected November CPI inflation reading of 1.2% y/y. We also see data on Monday revealing that the Markit manufacturing PMI deteriorated for the fifth consecutive month in November from a two-year low of 50.4 in October, in line with the Eurozone data.
We expect the zloty to stay under pressure in the coming week because of the likely more dovish rhetoric by some MPC members at the NBP's policy meeting, with the EUR/PLN potentially surpassing the 4.332 resistance level.
In Hungary, data on Monday will probably show that the manufacturing PMI worsened in November from a nine-month high of 57.3 in October, suffering from the loss of momentum in the Eurozone.
But we see the forint appreciating in the coming week, with the EUR/HUF nearing the 320.75 support level as we expect the U.S. November ISM manufacturing, ISM non-manufacturing and ADP readings to undershoot the consensus forecasts of 57.6, 59.1 and 195k, respectively.
In Russia, the monthly CPI release is due from Thursday and we are forecasting that consumer prices rose by 0.6% m/m in November with headline inflation accelerating for the fifth consecutive month, to a 16-month high of 3.9% y/y from 3.6% y/y in October, reflecting unfavorable base effects and the ruble's depreciation. We also expect data on Monday to reveal that the Markit manufacturing PMI deteriorated in November from 51.3 in October, underscoring fragile domestic demand.
Nevertheless, in the coming week we think that the ruble will benefit from around 1.5 million bpd combined oil production cut by OPEC and Russia at the Vienna meeting, with the USD/RUB potentially breaching the 65.90 support level.
In South Africa, we expect data on Tuesday to show that GDP growth ticked up to 0.6% y/y in Q3 from a two-year low of 0.4% y/y in Q2, driven by wholesale trade as attested to by high-frequency data. But we also see the Absa manufacturing PMI release on Monday revealing that the index remained well below 50 in November after a 15-month low of 42.4 in October, signalling further contraction amid the U.S.-China trade dispute.
We expect the rand to strengthen in the coming week, with the USD/ZAR possibly breaching the key 13.596 support level as we see the Q3 GDP reading surpassing the consensus forecast of 0.5% y/y and because the U.S. November ISM manufacturing, ISM non-manufacturing and ADP readings are likely to surprise the consensus on the weaker side (Continuum Economics: 57.0, 58.5 and 175k, respectively).
In Turkey, we see the CPI release on Monday revealing that headline inflation decelerated to 23.5% y/y in November from a 15-year high of 25.2% y/y in October with consumer prices ticking up by only 0.1% m/m. We think that inflation moderated on the back of the government's measures, including its call on companies to cut all goods prices in the consumer price basket by at least 10% as well as a freeze in energy prices until the year-end. In addition, data on Monday will probably show that the Markit/ISO manufacturing PMI improved for the second consecutive month in November from 44.3 in October, indicating better sentiment amid the lira's appreciation as well as the gradual thawing of U.S.-Turkey tensions.
We see potential for the lira's further appreciation in the coming week because of the likely softer-than-expected U.S. November ISM manufacturing, ISM non-manufacturing and ADP data, with the USD/TRY approaching the 5.10 support level.