FX

Following Chair Yellen’s boost to USD last week (noting that a rate hike may be appropriate “in coming months”), the focus turns to the US May labour market report (Fri) as improving data should further support the case of policy tightening. As per Payrolls Preview, our economists are looking for a fairly solid outcome, expecting NFP to print above 200k, unemployment rate to fall to 4.9% and hourly earnings to remain close to the 2.5%YoY. At this point, wages are likely to bear the most importance and a number close to 2.5% should be enough for the Fed to proceed with a rate hike in upcoming meetings (and for the market to adjust its expectations accordingly). Look for general USD strength this week. In the CEEMEA high yielders space, we expect TRY and ZAR to be more vulnerable than RUB. The former two are more sensitive to the Fed outlook and the portfolio flow channel, while the latter is being driven by the oil price (which was stable in May). At this point, domestic politics in Turkey and South Africa also pose larger risk to the respective currencies vis-a-vis RUB.

GFX