Comentario económico 17 de febrero de 2022

OVERNIGHT NEWS

# Bond yields drop for third day as stocks extend losses on Russia/Ukraine headlines, NATO meeting today. EUR/CHF offered below 1.05.

# Day ahead: ECB speakers De Cos and Lane, Fed’s Bullard. Turkey CB rate decision: SG forecast unchanged at 14.0%.

# FOMC minutes light on new specifics of size of rate increase in March or balance sheet reduction, most members back faster pace of increases than in 2015.

# Australia employment +12.9k in January, participation improves to 66.2%, unemployment rate steady at 4.2%.

# Japanese investors sold Y1,910bn foreign bonds last week, most since Aug-18. Core machinery orders rose 3.6% in December (5.1%yoy).

# Nikkei -0.83%, EUR 10y IRS -1.5bp to 0.809%, Brent crude -1.2% to $93.7/b, Gold +0.3% to $1,874/oz

Turkey rate decision: Hands of CBRT tied with inflation at 48.7%

January FOMC Minutes under-deliver relative to expectations; US 2y rates rally, March rate-hike pricing is pared; Gilts bull-steepen, despite strong inflation data; ECB’s Kazaks argues market pricing “somewhat too harsh”; PEN rallies on constructive political headlines; US 10y at 2.038% (-0.5bp).

Latin America:

Latam currencies strengthened during the session, amid a weaker dollar, stronger commodity prices, and other idiosyncratic catalysts. PEN was the outperformer, rallying by 1.4% to 3.75 amid constructive political headlines, suggesting consensus building heading into a vote of confidence for the new presidential cabinet on March 8. BRL and MXN followed, appreciating 0.8% and 0.6%, to 5.13 and 20.27, respectively. COP and CLP were little changed; however, CLP did close the session below the key 800 level, after strengthening 0.3% to 799.57 during the session.

Most local rates ended the session lower, alongside lower US rates. In Mexico, TIIE rates ended 8-11bp lower across tenors, 1y ended 10bp lower at 7.44%. Similar rates action was observed in Chile and Colombia, with CLPxCAM 10y closing 11bp lower to 5.90% and COPxIBR 10y closing 16bp lower to 7.80%

Headlines keep markets on edge

Risk-off tore through markets during Asian trading, as headlines from Sputnik news reported that “Ukrainian armed forces fired mortar shells and grenades at four localities in the self-proclaimed Luhansk People’s Republic,” citing the Joint Center for Control and Coordination. We note that we have not seen this report confirmed, but did note a denial from Ukraine. USD and JPY rose sharply alongside oil prices, while UST yields dropped in a bull-steepening move. Equities saw a similar dip. However, as we approached the Europe open, the edge of the risk off move had eased a little, with some of the moves seeing a little of a reversal. Earlier in the day, we had also seen Axios report that an unnamed US official said recent claims of Russia withdrawing troops are “false” and instead troop numbers on the border have actually been increasing. Overall, markets remain jittery and geopolitical headlines are expected to weigh on sentiment.

The NY session saw FOMC minutes read dovish, providing no new insights around balance sheet plans and the pace and magnitude of rate hikes. Equity prices reversed losses yesterday to trade flat. In the Asian session, we saw AUD employment data come in firm, although it did not move markets.

Looking ahead, we will be very watchful of geopolitical headlines as markets remain jittery. Today, USD will see Initial Jobless and Continuing Claims at 13:30 GMT, as well as Fedspeak from Bullard and Mester at 16:00 and 22:00 GMT respectively. SEK sees inflation expectations at 07:00 GMT, followed by Riksbank’s Breman speech at 08:00 GMT. Meanwhile, EUR sees ECB’s De Cos speaks at 08:45 GMT, followed by ECB’s Lane at 14:00 GMT. NOK will see Norges Bank Governor’s Annual Address at 17:00 GMT. In EM, we will sight rate decisions in PHP (07:00 GMT), HUF (08:30 GMT) and TRY (11:00 GMT), where no change is expected.

 

KEY MESSAGES
Following the ECB’s hawkish pivot at its last meeting,
we analyze the impact of the convergence of ECBFed policies on EM FX.
Given that the global growth environment and
commercial channel (above average PMIs and
elevated commodity prices) remain supportive for
EMs, we analyzed EMs response to different regimes
of monetary policy and growth.
We conclude that the best period for both EM FX and
EUR is during a higher than average growth
environment with a convergence between US and
Eurozone monetary policies.
The main transmission channel of this positive
correlation seems to be fixed income flows that
support EM assets.
However, given the recent strong performance of EM
FX these positives are priced in, according to our FX
risk premium, positioning and valuation indicators.

 

 

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