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


 11:49 (GMT) 11 Feb

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop

Asia was a mixed bag as Chinese traders returned from the week-long holidays. IDR was in steep losses of 0.48% against the greenback as Q4 and 2018 current account disappointed. CNY (-0.43%) and TWD (-0.21%) bearing the brunt of downside risks to trade talks this week. The Indian rupee was however consolidating some gains from last week's surprise RBI cut which was in-line with our expectations, and focus now turns to the CPI release on Tuesday. THB and MYR also in gains.

News and FX

Asia:

+ China: China's Holiday Spending Slows, Underlining Tough Start to 2019 ~ BBG

+ Indonesia: Prabowo expressed the wish to cut the use of coal and to revamp the 35,000 MW electricity program if he and running mate Sandiaga are elected in the election. ~ JP

+ India: Trade relations between India and the UK is not likely to be affected after Brexit, Crispin Simon has said. ~ ET

Europe

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

+ UK GDP was weaker than expected in December, falling 0.4% m/m so that Q4 grew by just 0.2%. Weakness remained centred on manufacturing, which fell 0.7% m/m in December, though services also fell 0.2%. GBP/USD dipped a little below 1.29 on the news, but was little changed against the EUR on the morning, with EUR/USD also under pressure, briefly dipping below 1.13. Both currencies may also have suffered little from reports that PM May had rejected Labour leader Corbyn's conditions for his support for her Brexit plan, but the USD showed general strength, breaking modestly above 110 against the JPY.

+ Swedish production data for December was much stronger than expected, with private production rising 0.9% m/m and 4.6% y/y, suggesting GBP growth of 0.75-1.0% q/q. EUR/SEK was slightly lower on the news, falling back a few figures from 10.50. Norwegian CPI was weaker than expected at 3.1% y/y in January, triggering a sharp EUR/NOK rise through 9.80.

Equities and bonds

+ Some consolidation/correction, as China returns from holiday with good equity gains, ahead of this week's trade talks, setting a better backdrop to the European open. DE10s +2bp. BTPs also steady, with 10s shying back from 3%, IT10s -3.5bp. Gilts trim the opening yield bounce after the weak output/GDP data, though broadly tracking core.

EMGE Europe:

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

The ruble depreciated a bit against the broadly stronger U.S. dollar at the beginning of Monday's session with the USD/RUB temporarily rising to 65.7655, erasing part of the gains registered late last Friday after Moody's upgraded Russia's rating to Baa3 from Ba1. But we think that the currency will resume appreciation in the next few days because of more substantial FX sales by exporters ahead of the start of the monthly tax payment period on Friday, with the USD/RUB potentially breaching the 65.50 support level.

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

The rand extended its losses at the start of Monday's session, with the USD/ZAR briefly climbing to 13.7342 after it surpassed the key 13.7216 resistance level. The currency was hurt by the U.S. dollar's broad-based appreciation, aggravated by power utility Eskom's announcement that it would implement rotational power cuts for the second consecutive day. We see potential for the rand's further depreciation in the next few sessions as Cosatu is due to hold a nationwide strike on February 13 as well as a strike in Cape Town on February 19 in protest against job losses, with the USD/ZAR possibly breaking the key 13.80 resistance level.


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