NY Open – Reaction mode
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Markets take a roundtrip after the FOMC, with USD and UST markets returning back to flat, though risk sentiment flies higher as event risks clear. NOK is top performer after Norges deliver a clear hawkish message and indicated no cuts for 2024, while AUD is a close second, u/r released overnight remained stable at 4.2%, employment growth was strong. USDJPY traded as high as 144, with LDP and BoJ jitters in focus. US equity futures rally, led by Nasdaq, now +2%. Gold recovered overnight, now trading back towards ATH of 2600. BoE decision due shortly at 07:00 EDT – no rate change though watch vote split (7-2) and guidance. QT pace could change. US initial jobless claims today at 08:30 should remain stable ~230k. In EM, SARB to deliver first -25bps cut, ZAR will be reactive to new forecasts. CBT due to leave rates (12:00). BCB hiked rates +25bps on Wed, hawkish messaging and forecasts could see BRL outperform intraday. TWD’s CBC left benchmark rates at 2%, CLP local markets remain on holiday. |
COP – COP is stronger on the day, having gained 0.71%. Local attention continues to be mostly concentrated on the financial plan and budget approval that is still under discussion. Trading notes a quiet day today in COP with some inflows from HFs being seen.
Trader Take – USDCOP Open Sept 19
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USDCOP traded lower yesterday with little client activity as the market was awaiting for the FOMC meeting. We saw some inflow interest, but interbank volumes were only 513 million. Nevertheless, the currency broke 4,200 lower and traded at a daily low (4158) after Fed decision. Today, the market is opening higher at 4180 with little volume traded so far. With FOMC behind us after the 50bps, EMFX seems to be trading slightly positive while COP is lagging. I think current levels are not very attractive given that focus will move towards Banrep and their move on Sept 30. Currently, IBR has 60bps cuts priced in cuts but Fed move could mean that they could speed up towards 75bps. I believe the chances of 75 increased after the Fed but still favor a 50bps after this month strikes. We have not seen strong interest at current levels as the position seems to be cleaner in COP. I continue to see RM (both Offshore and Local) long COP while HFs are lightly positioned. The forward curve traded lower yesterday with 1month basis now trading negative. The shorter tenors are also trading at a low basis, around 10bps. As I have mentioned before, it is difficult for market to maintain a negative basis for a long time, hence current levels present a good opportunity to buy 1month points as 2month and 3 month might be attractive soon. For spot today I am watching 4,170 as the first support and 4,215 as resistance |