OVERNIGHT NEWS
# Dollar mixed but month-end could support. CNH extends losses to 1.5% in two days, weakness could be tied to expectations of offshore dividend payments. 2y UST slips back below 2.50%, S&P futures -0.3%. FOMC minutes repeat hawkish guidance: move rates “expeditiously” towards neutral, 50bp could be appropriate “at next couple of meetings”.
# Day ahead: ECB speakers Centeno and De Cos, Fed’s Brainard, US weekly initial jobless and revised 1Q GDP. Banxico minutes. BTP and UST auctions. Turkey CB forecast to keep key rate unchanged at 14.0%.
# Russia CB slashes key rate by 300bp to 11.0%, says in statement to consider further rate cut at next meetings, inflation returning to 4% target in 2024, funds continue to flow into fixed-term RUB deposits while lending activity remains weak.
# S. Korea: BoK raises 7d repo rate by 25bp to 1.75%. Inflation forecast for 2022 raised to 4.5% from 3.1%, GDP lowered to 2.7% from 3.0%. Governor Rhee Chang-yong says current rate is below neutral. USD/KRW +0.2% at 1,267.
# Nikkei -0.3%, EUR 10y IRS -3bp at 1.68%, Brent crude +0.4% at 114.5/b, Gold +0.3% at $1,848/oz.
US employment shifting down a gear? Jobless claims at highest level since January

Bits and bobs
By Rui Ding
There were bits and bobs of interest overnight as risk sentiment attempted to stabilize. It was a somewhat quieter day due to Ascension holidays in Europe, but fixed income was happy to follow the post-FOMC minutes trend with the front end leading the move. This left equities close to flat, but some USD weakness. In particular, we’ve seeing European FX stabilize with EURUSD back above 1.07, while USDJPY unexpectedly dipped lower on confusing BoJ related headlines. CNH was the clear underperformer in light of persistent growth concerns.
For US markets, we expect more focus on data for the remainder of the week with limited Fedspeak risk, with conviction capped ahead of the long weekend. Jobless claims and the secondary estimate of Q1 GDP are coming up. GBP sentiment was helped by fiscal spending speculation, due to be confirmed shortly though we are not sure it represents a gamechanger for the currency. Central banks otherwise remain very much in focus – RUB saw a 300bps rate cut, KRW a 25bps rate hike, while TRY awaits its imminent rate decision. MXN sees Banxico minutes while we think CFIB Business Barometer could be a useful clue on CAD inflationary trends.
Overall, we continue seeing offshore clients to see the election as a secondary risk and are still waiting on what will happen over a second round and what actions will the president elect pursue. We expect COP to have a larger volatility than peers but to continue trading with the same direction than peers in upcoming sessions.
COP: Presidential election first round preview
By Santiago Calvache
Presidential elections are going to be held this Sunday May 29. With last polls being published we make a summary of main expectations as per polls and second round scenarios. First conclusion is that most likely scenario is that there will be a second round to be held in June 19. Latest polls show Gustavo Petro as front runner with an average of 38% of votes which have him placed in second round which would be needed in this case. Federico Gutierrez maintains the second place as it has been the case for polls since primaries were held. On third place Rodolfo Hernandez emerge as an alternative with new polls showing him with 21% of vote intention. For second round scenarios, Hernandez show a closer scenario with Petro (47% vs 50%) while Fico still lags when showed as the second-round alternative (44% vs 53%). Tonight, we will have one of the final debates, while during this week, we expect more interviews to be held as candidates have public gathers prohibited during last week.
During last week we have seen a slight reduction in offshore activity while locals, especially corporate, have increased their activity buying USD as it has been the case all year. Offshore clients have remained mixed and mainly following USD move abroad with lower activity. Past two sessions we have seen and increase in volume as we see larger intraday volatility and lower risk appetite by market makers. Last week the currency was able to close below 4,000 outperforming peers amid news from a new Public Offer now for Grupo Argos. The new public offer is for between USD 700 to 850 million and it should happen in the next 2 months. Although it is unclear whether it will translate into USD inflows, it follows expectations from past operations.
Overall, we continue seeing Offshore clients to see the election as a secondary risk and are still waiting on what will happen over a second round and what actions will the president elect pursue. Today we are seeing a move higher in COP mainly driven by outflows from local customers as offshore clients remain in de sidelines. We expect COP to have a larger volatility than peers but to continue trading with the same direction than peers in upcoming sessions. Market is expecting a second round with Gustavo Petro in it. We expect a broadly muted reaction after this weekend if no major surprise happens in the first round. 4,000 continues being the level to watch at is has proven to be a good selling opportunity for various offshore customers in previous sessions.
May FOMC minutes confirm “most participants” see 50bp hikes at the next “couple of meetings”; USTs twist-steepen amid soft data; Bunds twist-steepen as supply weighs on the long end; RBNZ delivers a 50bp hike; 10y JGBs outperform as short positions are squared; US 10y at 2.745% (-0.5bp).
Latin America:
Latam currencies mildly rallied despite a slightly stronger US dollar and CNY weakness overnight. COP was the key outperformer, strengthening 1.0% to 3937 during the session as orthodox policy candidates gained ground in second round simulations, which reduces the risk of unorthodox policy groups prevailing in the second round of the presidential election. CLP lagged and ended 0.2% lower to 832, largely weighed down by CNY underperformance. PEN appreciated 0.4% to 3.69 amid strong duration performance, with PeruGB 2032s rates 10bp lower to 7.72%. Other local rates performance was largely in line with US rates performance. In Brazil, DIs were the exception and continued to move higher by 8-10bp after the higher-than-expected CPI print in the previous session. January 2027 DIs ended 8bp higher to 12.1%. In Mexico, the TIIE curve moved 4-7bp lower across the curve with the 10y 5bp lower at 8.38%, ahead of Banxico May meeting minutes released on Thursday at 10:00am ED