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


 10:56 (GMT) 17 May

  [Forex Highlights]

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RECAP CURRENCIES, DATA AND EVENTS

Regional Backdrop:

During the week, Asian currencies weakened in response to the escalation in U.S.-China trade war. KRW (-1.53%), CNH (-1.33%), CNY (-1.24%), TWD (-1.1%) led the drop, as these are the currencies most vulnerable to a trade war. In contrast, INR (-0.31%) and THB (-0.37%) were more resilient as their elections draw to a close. MYR weakened only 0.4% as its GDP and current account surplus was better than expected

Asia FX and News:

+ China: CHINA INSIGHT: Richest Provinces Are Hurt Most by Trade ~ BBG

+ Singapore: April NODX -10.0% y/y (Prev: -11.8R); NODX - Electronics -16.3% y/y (Prev: -26.7)

+ Indonesia: Bank Indonesia to Intensify Expansionary Ops to Ensure Liquidity ~ BBG

+ India: Electors Jaded by 'Jingoism' as Polls Reach Climax: India Votes ~ BBG

+ USD/CNH: During the week, USD/CNH continued to climb higher. Pair started from the 6.8500 handle to reach 6.9365 at last look. This comes as China retaliated against the US for tariffs, and the US implementing measures against Huawei. USD/CNY also climbed throughout the week even as PBOC fixings were lower than what our model had suggested for 3 consecutive days. This suggests that PBOC may be unwilling to weaken FX by too much. Pair moved up from the 6.8400 handle towards 6.9117 at last look

Europe FX and news

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

+ GBP weakened through the European morning as the talks between the government and Labour were finally pronounced dead, with Labour leader Corbyn saying the talks had gone as far as they could and that he would oppose the government's Brexit deal. However, there were also reports that the government and Labour had agreed to put votes to parliament next week in an attempt to rule out a second referendum and indicate support for Brexit by July 31. GBP/USD fell to its lowest level since mid January.

+ EUR/USD also weakened through the morning. There was no clear driver, but Brexit uncertainty and political worries related to Salvini's recent comments and the upcoming EU elections continue to weigh. Eurozone CPI was essentially in line with expectations at 1.7% y/y, though the core rate at 1.3% y/y was slightly above expectations.

+ The USD also made ground against most other currencies, notably the commodity currencies which extended the weakness seen in Asia.

Bonds and equities

+ Periphery yield grab continues as mkts recover from pre-European-election jitters while core yields still low. Greece, Spain 10s lead at -6bp, latter helped by another big ticket morning buy and to new record yield lows (as are PT10s). Italy short end recovery also extends, IT2 -7.5bp. Bunds still -1.5bp, led by o/n UST dip buying in Asia, encouraged by harsher rhetoric on trade talks ('no point for now') from China media

US Data

Today sees May preliminary Michigan CSI data, where other surveys point to strength, and Apr's leading index. Fed's Williams also speaks today.

EMGE FLOWS

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

The ruble continued to outperform other EMEA currencies at the beginning of Friday's session with the USD/RUB temporarily falling to 64.5729, still driven by higher oil prices, strong demand for government bonds as well as the ongoing tax payment period. We think that tax payments will continue to help the currency in the coming week, with the USD/RUB possibly falling below the 64.38 support level.


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