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


 10:36 (GMT) 16 Aug

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop:

Majority of the Asian currencies were in the red against the dollar, as risk-off sentiments remained strong after the Treasury bond markets sent a recession signal. PHP was the biggest loser down 1.05%. INR and THB were down 0.58% and 0.49% respectively. They were followed by JPY (-0.42%), IDR (-0.37%), SGD (-0.22%) and KRW (-0.12%). CNH and CNY were the only winners, up 0.61% and 0.23% respectively against the greenback. HKD, MYR and TWD were roughly stable.

Asia FX and News

+ China: What Downturn? Alibaba Reports Steady Results Amid Global Tumult ~ BBG

+ Indonesia: Jokowi Eyes Highest Indonesia Growth Since 2013 as Risks Loom ~ BBG

+ USD/CNH: USD/CNH started the week moving around the 7.1000 big figure, as markets were calmed by China's strong PBOC fixings compared to trend. Pair shifted on 13 August down to the week's low of 6.9908 before rebounding partially to 7.0526 last by Friday. China's data was weak in July, with industrial production and retail sales below market expectations. USD/CNY started the week aiming to catch up with USD/CNH. Pair reached a high close to 7.0700 on 12 August. Pair came off after Trump's trade truce, delaying tariffs until end of the year (along with USD/CNH). For USD/CNY, it has since moved on a bid tone, last at 7.0436.

Europe FX and news

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

+ The USD made modest gains through the European morning, picking up ground against the EUR and JPY while falling slightly against a GBP, while commodity currencies also made modest gains in a more risk positive market.

+ GBP made gains on the crosses, again probably helped more by short covering than news, although there was some increase in hopes that a "no deal" Brexit could be blocked as opposition parties continued to discuss potential methods.

+ Risk appetite was supported in Asia by some comments from China's state planner indicating it will roll out a plan to support consumption, but the continued recovery in Europe may be mostly about end of week short covering rather than any particular event.

+ Eurozone trade data showed a small decline in the surplus in June, to 20.6bn from 22.6bn, but implied a substantial improvement in the surplus for Q2.

Bonds and equities

US 10y yields are up 4bp in overnight trading at 1.56% with 30y bonds cheapening by 5bp to yield 2.02% while UK 10y Gilts lose 3.5bp to trade at 0.44% although with the long end of the UK curve outperforming further as 30y Gilt yields drop 2bp to 0.93% after trading as low as 0.90%. German 10y yields are instead only 1.5bp higher at -0.70% after trading as low as -0.71% with the belly of the curve underperforming while Italy cheapens the most in the Eurozone after the recent rally resulted in BTP yields trading below levels seen before the political crisis. 10y BTPs currently trade at 1.36%, up 3bp from yesterday while Spanish and Portuguese bonds are flat and Greek 10y GGBs richen by 5bp to yield 1.93%.

US Data

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

Today we expect Jul housing starts to rise by 0.9% to 1260k and permits to rise by 3.1% to 1270k. Preliminary Aug Michigan CSI may see some impact from the latest equity volatility.

EMGE Flows

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

At the beginning of Friday's session, the forint appreciated a bit on short covering in the aftermath of U.S. President Donald Trump comments about the short timing of a possible deal with China on trade, with the EUR/HUF temporarily falling to 324.47. But we expect the currency to stay fragile in the coming week due to the MNB's dovish bias, with the EUR/HUF possibly breaching the key 327.55 resistance level.

GOOD MORNING Latam! (FX HIGHLIGHTS BRL MXN ARS CLP COP PEN)... (0101-NMZC-C04)

The ruble gained slightly at the start of Friday's session, driven by higher oil prices as well as the ongoing tax payment period with the USD/RUB briefly falling to 65.8645. Despite worries about global growth, we think that the currency has limited scope for losses in the coming week because of tax payments, with the USD/RUB unlikely to surpass the 66.50 resistance level.


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