Comentario económico 1 de marzo de 2023

COP – COP is the worst performer in the Latam region, despite the rally in oil today. Our local traders note quieter flows today. Colombia Urban Unemployment Rate rose to 14.5% in January, higher than 14.0% consensus and 10.8% prior. National Unemployment Rate followed the same trend, rising to 13.7% from 10.3% prior. On local news, Petro made changes to his cabinet, with Education Minister Alejandro Gaviria ousted for being the most vocal internal critic to the bill. Our trader notes that the recent event seems to be taken by the market as non-material, which could be the case as the reform could be trimmed fiscally and have opened the door for negotiation from the government, even though it cost losing one of the most experienced members of cabinet. Given the headline risk and increased possibility of further developments that could trigger a new wave of underperformance, rather than the opposite, our traders continue to like to buy the dips in USDCOP.

Strong beats in Chinese manufacturing PMI data has reinvigorated positive risk sentiment across markets – equities are rallying while high-beta currencies continue to gain against broad-based USD selling. EURUSD is soaring higher as we anticipate Germany nationwide CPI at 08:00 EST, where our economists are above consensus forecasting for headline at 8.8% YoY following state-level beats. ECB’s Visco at 10:00 will have an opportunity to comment after hawkish ECB members overnight (Villeroy and Nagel) supported higher ECB terminal rate pricing. Bunds are under pressure, though gilts are rallying as markets were quick to interpret Governor Bailey’s comments as dovish. Note QT begins today though impact will be benign in the near-term

Elsewhere, US watches for further moderation in ISM manufacturing at 10:00. Political updates are heavy in Ceemea: Bola Tinubu was declared the new President-elect for Nigeria, Turkish President Erdogan signaled that May 14 elections will be happening, while Israel’s Knesset approved the next step for judicial reforms. In Latam, Brazil markets will digest the latest oil export tax headlines, while Peru watches CPI data at 10:00 EST.

French, Spanish CPI accelerate, market pricing for ECB terminal rate hits 4%; Long-end, select 10y JGBs considerably outperform; USTs twist flatten before ISM Manufacturing; NBH remains on hold; COP underperforms as unorthodox policy concerns rise; US 10y at 3.920% (+0.6bp).

Latin America:

The performance of Latin American currencies was mixed, in line with global risk appetite. CLP and PEN were the region’s best-performing currencies, up by ~0.7% and 0.4%, respectively, as copper prices rallied by almost 1.8%. In contrast, COP depreciated by 2.1% as President Petro dismissed some members of his cabinet, including education minister Alejandro Gaviria, which increased concerns of unorthodox policy. Local rates remained under pressure across the entire region, with Colombia as the main underperformer following the cabinet reshuffling headlines. 5y IBR closed 15bp higher, at 10.41%.

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