OVERNIGHT NEWS
* Dollar and bond yields soft, gold races to $1,865/oz and silver rockets to $22.83/oz, highest since 2013; Japan PMIs stay below 50 in July, cast doubt over speed of recovery; US Rep and Dem parties spar over extension of unemployment benefits
* SG Research slide pack : ‘Questions for the summer and beyond’
* Day ahead: ECB president Lagarde speaks in Washington Post webinar at 3:15pm CET, Canada CPI, US existing home sales
* Japan July flash mfg PMI rises from 40.1 to 42.6, services up to 45.2; sub-50 readings show contraction extending into 3Q
* Nikkei -0.58%, EUR 10y IRS unch at -0.20%, Brent crude -0.5% at $44.1/b
ZAR: stage set for another 25bp rate cut tomorrow
El impulso continúa favoreciendo a los activos de riesgo y mantiene la presión sobre el USD conforme los
acuerdos y las negociaciones en relación con los paquetes de ayuda respaldan el optimismo económico. Desde un
punto de vista técnico, muchos activos han roto sus resistencias técnicas, lo cual sugiere que aún disponen de
margen adicional. Pese a la incertidumbre continuada que genera el coronavirus y un entorno económico de alto
endeudamiento, los niveles de liquidez siguen siendo amplios gracias a la compensación del sector financiero.
Aunque el ritmo de repunte del riesgo podría no ser tan rápido o sincronizado como en abril, es probable que la
tendencia subyacente mantenga el signo positivo a corto plazo. Teniendo esto en cuenta, aún habría margen tanto
para la diferenciación como para un repunte adicional de las divisas de LatAm como clase de activos.
Ayer, el COP avanzó alrededor de un 0,8% y reflejó la debilidad general del USD frente a la mayoría de divisas, y el
repunte en el precio del petróleo influyó probablemente en el comportamiento positivo del COP. Mientras que el
impulso externo sigue favoreciendo a las materias primas y los movimientos de precios del COP, los riesgos
domésticos continúan aumentando en un segundo plano conforme crecen las preocupaciones en torno al crédito.
El martes, Fitch hizo pública su visión de que los riesgos bajistas a corto plazo en Colombia van en aumento
conforme la recesión ejerce presión sobre los ingresos gubernamentales. La caída en el precio del petróleo en un
contexto de contracción económica global y la incierta dinámica en el lado de oferta no hacen sino agravar los
problemas económicos de Colombia. Puesto que nuestros modelos también muestran una cierta sobrevaloración
del COP, preferimos adoptar posiciones cortas en la divisa frente al BRL a corto plazo.
Risk sentiment wobbled overnight on the return of tit-for-tat tensions between US and China. Having ignored these headlines for some time, USDCNH finally woke up after the US asked China to close its consulate in Houston, Texas, “to protect American intellectual property and Americans’ private information.” In retaliation, China is reportedly considering closure of the US consulate in Wuhan. The situation remains fluid, but the knee-jerk reaction in risk was clearly exaggerated by positioning squeezes.
While risk assets dipped across the board, we would be cautious in chasing the headlines. CNH is likely to underperform. Elsewhere, EURUSD has no signs of stopping, testing the key 1.1570 level flagged by CitiFX Technicals as it continues to enjoy the post-Recovery Fund euphoria. CEE outperforms while GBP underperforms, as both broader aversion and Brexit headlines weigh.
Looking ahead, USD remains focused on Phase 4 negotiations, while CAD sees a CPI print.
GLOBAL
*U.S. stock-index futures drop with global markets amid rising tensions between the world’s two biggest economies
*U.S. Says China´s Houston Consulate Ordered To Close On IP Issue
*China Vows Retaliation After U.S. Shuts Down Houston Consulate
*The U.S. accused two Chinese hackers of working with Beijing to steal coronavirus research from Western companies
*Trump Urges Americans To Wear Mask When Not Socially Distancing
*Senate Panel Advances Waller and Shelton Nomination For Federal Reserve
*Japan, Australia e Hong Kong Cases Accelerate
COLOMBIA
*(CO) June Retail Confidence, prior -9.2
*(CO) June Industrial Confidence, prior -21.3
*Colombia to Sell Mainly Mining, Energy Companies: Zarate
aversion due to rising US-China tensions. The impact on the FX market has been
modest with the USD only able to regain a small portion of the ground lost yesterday.
The AUD, which surged through previous resistance at 0.70 against the USD and
75.00 against the JPY is holding onto those gains this morning despite equity
markets being in the red. In fact, the only notable decliner against the USD is GBP
which may have been troubled by unhelpful headlines around the outlook for a Brexit
trade deal and for a UK-US trade deal before the end of the year. The pockets of bad
news around COVID-19 continue to have little impact on the risk mood. Among the
troubling headlines, global cases are now just shy of 15M, Hong Kong and Australia
reported a record number of new daily cases, and the daily death toll in the US rose
by the most since early June.
The escalation in US-China tensions is a reminder of the headline risk faced by
the FX market during the up-coming US election campaign. The risk mood
turned sour after China’s foreign ministry disclosed that the US had ordered the
closure of China’s consulate in Houston, Texas. The statement said that if the US did
not reverse this decision, China would “react with firm counter-measures”
(Bloomberg). Among the many likely areas of division between the Republican and
Democratic parties, one common aspiration is to recalibrate the US relationship with
China. This suggests China is likely to be a key element during the election
campaigns. The fact that the escalation is happening with many months still to run to
election day might be a cause for concern. But the key barometer of the mood for
financial markets is likely to be whether the “phase one” US-China trade deal remains
intact. So long as it does, the impact on risk appetite of headlines may prove fleeting.
The big “risk on” FX reaction to the EU recovery fund agreement shows the
sensitivity of the market to stimulus news. The focus now turns to US fiscal
policy. Talks between the key protagonists at the White House, Senate and House
are ongoing as they work to secure agreement before the next recess scheduled on
or before 10 August. Our economics team points to four main areas of debate1
–
direct payments for households, supplementary unemployment compensation, aid for
small businesses and budget relief for local and state governments. They expect
agreement to be reached by early August, with a package of USD1tn. For the USD,
further fiscal stimulus could provide a cyclical boost or it could see the USD weaken
due to a “risk on” mood. For now, the latter reaction function feels more likely given
the over-riding dominance of RORO