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


 10:25 (GMT) 20 Aug

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop:

Asian currencies again saw mixed performances on Tuesday. The U.S. decision to extend Huawei waiver had limited market impact, and investors were still cautious ahead of some key event risks this week. KRW was up by 0.23% against USD, followed by THB (+0.10%). India Rupee lagged behind its Asian peers, down by 0.30% against the greenback. Other currencies followed, IDR (-0.20%), TWD (-0.17%), MYR (-0.12%), CNY (-0.12%). CNH, HKD, PHP were fairly stable.

Asia FX and News

+ China: China Pork in Serious Trouble as Virus Carnage Continues~ BBG

+ Indonesia: Indonesia to Use State Budget to Sustain Growth Momentum~ BBG

+ USD/CNH: USD/CNH has come off after reaching weekly high. Pair was almost reaching 7.0800 handle before retracing its steps down to 7.0732 last. This comes on a quiet day in terms of Asia data. However, there continues a relief rally with Asian equities up on Tuesday morning Asia time. Focus next turns to 7.1124 resistance, with support of 7.0411.

Europe FX and news

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

+ GBP and the EUR weakened in the European morning. Markets reacted negatively to Johnson's letter to Tusk seeking the removal of the Irish backstop, with GBP falling across the board. The EUR also fell against the USD and the JPY, dragged by Brexit concerns as well as the likely fall of the Italian government later today.

+ USD/JPY moved lower through the morning, reversing Monday's gains, helped by lower US yields

+ AUD/USD gave up some overnight gains, settling back in the middle of a 0.6750-0.68 range.

+ USD/CAD continued the firm tone seen on Monday, though without any obvious drivers, with oil prices slightly firmer.

+ EUR/SEK moved higher through the morning, with EUR/NOK also mildly bid.

Bonds and equities

Uncertainty supports US, European bonds with 10y US yields down 3bp at 1.575% although US longs continue to underperform. 10y Bund yields are also 2.5bp lower at -0.68% with the German curve flattening between 2y and 10y maturities and 30y Bunds also underperforming ahead of tomorrow's EUR 2bn new 30y Bund 08/50 supply for which the coupon has been set at 0%. UK yields are also lower with 10y Gilts richening by 1.5bp to yield 0.45%, resulting in flatter UK curve as 30y Gilts outperform slightly, while yields rise only in Italy where 10y BTPs are 5bp cheaper at 1.48% as Italy's government survival is challenged today in Parliament.

EMGE Flows

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

The ruble appreciated on higher oil prices and the ongoing tax payment period at the start of Tuesday's session, outperforming other EMEA currencies with the USD/RUB briefly falling to 66.627. We expect tax remittances to continue to help the currency in the near term, with the USD/RUB approaching the 65.60 support level

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

The lira continued to weaken at the start of Tuesday's session, still underperforming other EMEA currencies with the USD/TRY briefly rising to 5.7143 after it broke the key 5.69 resistance level. The currency remained driven by the CBRT decision on Monday to set lower reserve requirement ratios and higher reserve requirement remuneration rates for banks with a 10-20% annual lending growth rate. We see scope for the lira's further underperformance in the next few days because of fears about a substantial rate cut by the CBRT at the September 12 policy meeting, with the USD/TRY potentially surpassing the key 5.75 resistance level.


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