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


 10:27 (GMT) 13 May

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop

Asian currencies weakened on Monday. Mood has darkened. Trump continues to up the pressure on China through his tweets, wanting them to agree before a worse deal comes along. However, China's response have been relatively quiet publicly. KRW led losses with 0.86% loss against USD, followed by CNH (-0.83%), IDR (-0.78%), INR (-0.62%) Philippines markets were closed for election,

Asia FX and News:

+ China: Trump Trade Talks With China Head for Stalemate as Trust Eroded ~ BBG

+ China: Chinese State Media Blames U.S. for Setback in Trade Talks ~ BBG

+ Indonesia: "President Joko "Jokowi" Widodo has reaffirmed his commitment to structural reforms during his "second term" to attract more investment to the country and to boost exports" ~ TheJakartaPost

+ India: Popularity No Gauge for Winning Seats in Elections: India Votes ~ BBG

+ USD/CNH: On Monday, USD/CNH continued on the bid tone set on Friday. Pair started the week at the 6.8500 handle but last at 6.9024. This breached the resistance level that we had watched for. Markets likely watching for possible PBOC intervention at this stage. PBoC fixed mid-point at 6.7954 vs. previous close of 6.7820. USD/CNY gapped higher by two big figures and last up to 6.8678. 1Y NDFs have moved to 6.9513 last.

Europe FX and news

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

+ The USD moved lower against most of the majors in the European morning, after gaining a little overnight against all currencies other than the JPY and CHF. There was little news of significance for the USD through the morning, but the market continued to respond to the deteriorating prospects for a US/China trade deal.

+ Q1 Norwegian GDP was on the weak side of expectations, rising 0.3% q/q against the 0.4% expected on a mainland basis, while total GDP was weaker still at -0.1%. NOK edged a little lower, but was little changed against the SEK, suggesting the weakness was mainly related to general risk appetite than the data.

+ The NOK and CAD may also have received some support later in the session from a firming oil price, which was benefitting from Middle East tensions and reports of weaker Russian production, though reports of tanker sabotage appear to be untrue.

+ GBP showing little sensitivity to increasing talk of breakdown on government talks with Labour and polls showing increasing lead for Brexit party in European election polls.

Bonds and equities

+ US yields plunged by 5bp from Friday's close in overnight trading with 10y UST reaching 2.42% as flight to safety extended on deteriorating US/China relations. 10y Bund yields decline by 1bp to -0.055% while Italian and Greek bonds rise by 4bp and 5bp to 2.72% and 3.54%, respectively. UK 10y Gilt yields fall by 1bp to 1.125% despite a looming long dated conventional Gilt supply.

US Data

The week's US data calendar starts quietly, with little due today. Today sees voting moderate Clarida and voting hawk Rosengren.

EMGE FLOWS

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

The lira weakened to USD/TRY 6.07 in early morning trading on the back of concerns over U.S.-China trade deterioration. On Sunday Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any 'bitter fruit' that harmed its interests. The market now expects counter-measures from China after Washington increased tariffs on USD 200bn in Chinese goods and the U.S. trade representative has said that the U.S. is now preparing to raise tariffs on all remaining imports amounting to USD 300bn. Domestically, the market is still affected by the rerun of the Istanbul elections and the CBRT's decision to halt the one-week repo auction on Friday, in what was a 'backdoor' interest rate hike, has not calmed the market. We expect the lira to continue to underperform in the rest of the session, as domestic uncertainty will combine with concerns over the deployment of the S-400 missiles to push USD/TRY towards the 6.2273 resistance level.

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

The rand has weakened to USD/ZAR 14.3150 in early morning trading, as U.S.-China trade tensions are weighing on the currency. On Sunday Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any 'bitter fruit' that harmed its interests. The market now expects counter-measures from China after Washington increased tariffs on USD 200bn in Chinese goods and the U.S. trade representative has said that the U.S. is now preparing to raise tariffs on all remaining imports amounting to USD 300bn. Domestically, last week's elections appear to have comforted the markets, as they promised the status quo, with the ANC attracting 57.5% of the votes. Still, the market will most likely remain cautious before adding to long rand positions until the Cabinet is revealed on 28 May. The rand will continue to be driven by global factors in the rest of the session, most likely moving towards the USD/ZAR 14.40 resistance level.


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