We maintain the view that COP’s current carry profile appropriately
compensates investors for ongoing idiosyncratic risks, though
fundamentals remain less appealing.
Like: We maintain a constructive view on Colombia rates, as we still think that market
expectations for the terminal rate in Colombia remain too elevated versus the neutral
rate, especially accounting for BanRep’s dual mandate
NY Open – Politics heavy
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Betting and financial markets increased Trump re-election odds after the failed assassination attempt, the clearest impact being the UST curve bear steepening. USD trades broadly flat, MXN is the worst performer. US equity futures lead gains, Asian equities traded mixed while the European equities complex trades in the red. How markets trade throughout the day will be telling on how much of Trump is already priced. Overnight, China data continued to underwhelm. Fed Chair Powell (12:30 EDT) is the other key focus for markets. While he may indicate that slowing inflation is “encouraging”, he will likely stop short of offering calendar guidance. Fed’s Daly features in a Q&A at 16:35, while Empire Manufacturing prints ahead at 08:30. Back to politics, the RNC kicks off today. Watch out for Trump’s VP pick. President Biden will be interviewed by NBC news at 21:00 EDT. Earnings season continues.
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MXN: USDMXN pushing higher as Trump odds rise
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Following the failed Trump assassination attempt, the USD advanced with markets pricing a greater possibility to see Trump winning the US election. The spotlight is on Republican National Convention from today through 18th July. MXN slipped ~1% this morning given its beta to Trump election odds / US protectionism ideas (highest print so far at 17.84), we saw small net outflows on our side with some RM & HF names buying the pair. Since the last few sessions, we saw HF / models rebuilding the long peso position (with positioning now almost back to the level before MXN election for HF), while RM have been less involved in the last few sessions. We like to fade any extreme move in usdmxn today, and we are watching 17.60-17.6315 (50d-MA) on the way down and 17.95-18.00 range on the topside. |
COP: Banrep Economist Survey for July. Citi Economics is looking for evolution of yearend inflation expectations as well as consensus over the size of the CB’s next policy moves. Regardless of the survey, our local economists will likely maintain their 1m COLTES 2028s NDF-FX hedged. Less market-moving will be Industrial Production YoY at 16:00 BST for May