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


 11:52 (GMT) 13 Feb

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop

The Asian markets were in a state of relief after President Trump signalled flexibility on the March 1 tariff deadline. The Chinese yuan expectedly led the gains on the Asia board against the USD, up 0.21% at last look. The focus is now turning to China's January trade numbers due on Thursday as exports are expected to decelerate further. KRW followed with 0.19% gains, while IDR and MYR were also seen with over 0.1% gains driven by the risk on sentiment. India's January CPI was at a 19-month low, adding credibility to RBI's rate cut decision, and opening the room for further INR appreciation.

News and FX

Asia:

+ India's January inflation dipped to a 19-month low suggesting more space for monetary policy easing.

+ Federal Reserve Bank of Cleveland President Loretta Mester says she's seen no evidence to prove that the central bank's gradual unwind of its balance sheet was to blame for financial market volatility in the fourth quarter.

+ USD/CNH continued on a downward shift on Wednesday. Pair was last seen at 6.7666 after being close to the 6.8000 handle a day earlier. Trump has said that he is open to an extension to the March 1 deadline for US-China trade, which boosted market sentiment. Focus will also shift to trade, monetary and inflation data out later this week PBoC fixed mid-point at 6.7675 vs. previous close of 6.7715. USD/CNY gapped lower, last at 6.7574. CNY/CNH gap narrowed to below 1 big figure. 1Y NDFs followed spot movements to 6.7840 last.

Europe

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+ EUR/SEK fell around 1% through the morning after the Riksbank left both rates and their rate projections unchanged, maintaining the projection of another rate hike in H2. However, they are loath to change outlooks in consecutive meetings, so the unchanged policy was widely anticipated. They reduced their GDP forecast for 2019 to 1.3% from 1.5%. While the SEK gained 1% after the meeting, it went into the meeting 0.5% above yesterday's lows, so the rise was less dramatic than it appears.

+ Chief Brexit negotiator Ollie Robbins was reported to have made comments in a bar indicating that the UK parliament would have to choose between May's deal and a significant extension to the Brexit deadline sometime in March. UK CPI was essentially in line with expectations, with the y/y rate down to 1.9%, a 2 year low. GBP was little changed through the morning.

Equities and bonds

+ BTPs firm out of well -taken supply, 5s in particular -8bp. Outperforms Spain, although latter outright steady, as mkt eyes snap election risks if Budget cannot pass. 2046 German sale pretty much covered, bunds flat on the day. Gilts remain jittery despite the 'deal or delay' talk, with low CPI print going with the grain, GB10s -1.5bp.

US DATA

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CPI today should be unchanged, but with gains ex food and energy of 0.2% for the CPI. Non-voting Fed moderate Bostic and hawish Mester speaks today.

EMGE Europe:

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The rand weakened at the start of Wednesday's session, underperforming other EMEA currencies with the USD/ZAR briefly rising to 13.86 after it breached the 13.8524 resistance level. The currency was hurt by the fourth consecutive day of rotational power cuts by Eskom, aggravated by a presentation from the Department of Public Services, according to which the power utility would "cease to exist at the current trajectory by April" unless it receives the government's help as well as the nationwide strike by Cosatu in protest against job losses. We expect the rand to extend its losses in the near term due to power cuts as well as the planned strike by Cosatu in Cape Town on February 19, on the eve of the Budget Speech, with the USD/ZAR possibly surpassing the key 13.9515 resistance level.

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The koruna extended its gains at the start of Wednesday's session, outperforming its CE3 peers with the EUR/CZK briefly falling to 25.794 after data showed that CPI inflation accelerated to 2.5% y/y in January from 2.0% y/y in December, well above the consensus call of 2.1% y/y as well as the CNB's forecast of 2.0% y/y. We think that the currency will continue to benefit from rising expectations of further monetary tightening by the Bank in the next few days, with the EUR/CZK nearing the key 25.64 support level.


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