NY Open – Necessary event ease
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Markets take a breather after one of the most intense event windows in years. Trump trades are taking a pause to consider all policy implications. US 10s basing around 4.3% post FOMC, with USDJPY stalling ahead of 152. China NPC confirmed USD1.4tn in local debt swap but markets had hoped more measures would be announced. China proxies underperform consequently, dragging on global equity sentiment slightly. We expect US markets to temper into the weekend, with Veteran’s Day on Monday meaning bond markets will be closed, and some lingering concerns about geopolitical weekend risk. We expect a modest decline in long term UoMich inflation expectations at 10:00 ET. Mind CAD labor report at 08:30 where Citi Economics calls for flat employment change, the lowest forecast on the street. Latam FX will balance global and local drivers – BRL IPCA inflation due shortly while we wait for fiscal updates. CLP inflation beat, COP inflation due after close while PEN saw 25bp rate cut. |
COP – COP was the best performer amongst its LatAm peers against the dollar in today’s session having gained +2.42%. USDCOP gapped lower at the open testing 4350 level amid inflows from RM clients and HFs. The move was a catchup from yesterday after market moved in LatAm currencies and has found some bid around 4355-4360 area. As the rest of global environment, the move is a sell the news trade in which our traders have seen liquidity getting reduced. Yesterday it was mostly a take-profit environment while today our traders are seeing new positions being added. Interbank volume has been at average levels in these past sessions. The government also announced a 33Tn spending cut for the rest of the year. This was needed for complying with fiscal rule and was expected given the fall in tax revenue during the year but expectation was close to a 20Tn cut instead of this 33Tn which is positive for deficit. COLTES gapping 10-15 lower and USDCOP at days lows on the back of this.
Trader Take: USDCOP Open Nov 8
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USDCOP traded lower yesterday following EMFX but falling more than peers. The move was initially driven by the global environment in which we saw RM, FM and Corp selling USDCOP. Around 4320 levels we saw some buying but in smaller sizes. Before close to the end of the session, a local news outlet reported that President Petro had agreed on a COP 33TN spending cut. Previously, the government had frozen COP 20Tn of spending, but they are now announcing that there would be a cut and adding some more to it. The announcement generated a rally in Colombian assets with COLTES gapping more than 20bps and USDCOP rallying towards the session low and closing at 4305. The question is still whether the amount announced will be enough to enter After the market, we saw mixed interest that took market to test 4300 level but found bid again there. I will be watching 4300 as support and 4430 as resistance. |