Forex - Brazil Flows: Benefitting From Improved Trade War Rhetoric

 12:20 (GMT) 13 Sep

  [Forex Flows]

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Brazil Flows: Benefitting From Improved Trade War Rhetoric (0101-NZJP-C01)

BRL is opening the day stronger by 0.3% at 4.051. The move comes with stronger global backdrop, supported by positive reaction to President Trump saying he would consider an interim deal with China while a full deal is still preferred. Risk on is benefitting the entire emerging market class, but we should beware of another false dawn. Still the tone is not enough to move out from the 4.00/10 range with risk of a return over 4.05 if Trump returns to confrontational trade rhetoric.

The lower pressure on the currency should ease BCB need to intervene above the usual US$580mn in spot market and US$580 in FX swaps.

Di curve is down, following BRL gains and mixed Proxy GDP numbers. Jan 20 Di is 2bp down to 5.25% while Jan 25 DI is unchanged at 6.95%.

Data wise, in the domestic market, after the mixed IBR numbers, there is no significant data in the calendar.

In the US, a significant release will be Aug retail sales on Friday. After a strong Jul we expect slower gains of 0.2% overall and 0.1% ex auto though sales ex auto and gasoline should rise by a respectable 0.4%. Also due on Friday are Aug import prices and Jul business inventories, while Sep's preliminary Michigan CSI should see some correction from Aug weakness.

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