Forex - GOOD MORNING Latam! (FX HIGHLIGHTS BRL MXN ARS CLP COP PEN)...


 10:25 (GMT) 23 May

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop:

Asian currencies were a mixed bag against the dollar on Thursday. IDR was the biggest winner, up 0.38%. Violence from the protests in Indonesia seemed to have calmed down slightly, helping the recovery of rupiah. KRW was up 0.34%. Both JPY and PHP were up 0.12% and 0.08% respectively against the dollar. On the other end of the spectrum, SGD and MYR were down 0.22% and 0.18% respectively against the dollar. They were followed by CNY (-0.13%), THB (-0.11%) and CNH (-0.06%). HKD, INR and TWD were roughly stable.

Asia FX and News:

+ China: The U.S. unilaterally escalated trade tensions and if they want talks to resume, they need to correct their wrong actions and show sincerity, according to MofCom ~ BBG

+ Singapore: April CPI (Prev: 0.6); Core CPI 1.3% (Prev: 1.4)

+ Indonesia: Central bank is committed to keep being in the market to stabilize rupiah in line with its fundamentals, according to Governor Perry Warjiyo. ~ BBG

+ India: PM Modi is set to win a majority on his own in India's general election, with his Bharatiya Janata Party surging to a commanding lead in early vote counting. ~ BBG

+ USD/CNH: USD/CNH edged up to an intraday high of 6.9425 at the beginning of Thursday's Asian session, before slipping slightly to 6.9375. USD/CNY had gapped higher on Thursday, climbing to a high of 6.9217 last. PBoC fixed mid-point at 6.8994 vs. previous close of 6.9068. Given that USD/CNY remains below USD/CNH (2 big figure gap), suspect official intervention to keep pair around current ranges for now. Pair remains vulnerable to any hawkish stances in the US-China trade war. 1Y NDFs last at 6.9783.

Europe FX and news

GOOD MORNING Latam! (FX HIGHLIGHTS BRL MXN ARS CLP COP PEN)... (0101-LPCY-C02)

+ Eurozone PMIs were slightly on the weak side, with the composite measure for the EZ at 51.6 in May, slightly below the market expectation of 51.7 but above the 51.1 recorded in April. The decline in the German IFO survey was more significant, with the main index of 97.9 well below expectations and the lowest since 2014. The current assessment index also fell to 100.6 (from a revised 103.4), while the expectations index remained unchanged at 95.3. Earlier, German GDP was confirmed as rising 0.4% in Q1, but it was notable that final demand was strong, rising 1% q/q, with the change in inventories subtracting 0.6% from growth.

+ The EUR weakened through the morning, mainly in response to the IFO data, trading below 1.1130. GBP/USD was initially weaker, hitting a low at 1.2605, but recovered after the IFO numbers back to opening levels around 1.2640, possibly reflecting EUR/GBP selling. USD/JPY fell through the session, matching weakness in equities, accelerating declines after the IFO data but holding above 110. CAD continued the decline seen overnight. EUR/SEK traded a little lower, helped by a much lower than expected unemployment print.
Bonds and equities

+ Ongoing concern over 'tech trade war' and Brexit developments as well as further data misses on EZ sentiment surveys has core further bid, GB10s testing 1% and bunds back below -0.1%. Periphery mixed, Spain firm through supply while IT10s and GR10s +3bp on the risk off trade (stoxx down over 1.5%). GS also making a bearish Italy call (IT-DE to widen to 330bp).

US Data

GOOD MORNING Latam! (FX HIGHLIGHTS BRL MXN ARS CLP COP PEN)... (0101-LPCY-C03)

Apr new home sales data is due today and should slip by 1.7% to 680k trends are picking up. Also due are weekly initial claims (for Jun's payroll survey week) and May Markit PMI data.

EMGE FLOWS

GOOD MORNING Latam! (FX HIGHLIGHTS BRL MXN ARS CLP COP PEN)... (0101-LPCY-C01)

The lira continued to weaken at the beginning of Thursday's session, still underperforming other EMEA currencies with the USD/TRY temporarily rising to 6.151 after it surpassed the ley 6.1305 resistance level. The currency suffered from global risk aversion on the U.S.-China trade war, the higher risk of a no-deal Brexit as well as softer-than-expected German May IFO and manufacturing PMI data, aggravated by worries about potential U.S. sanctions and data showing that the seasonally adjusted real sector confidence index deteriorated to a seven-month low of 94.7 in May from 100.0 in April. We expect the lira to remain vulnerable in the near term, with the USD/TRY possibly exceeding the key 6.20 resistance level.


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