COP – COP is outperforming its Latam peers today. Flow wise, we have seen inflows from Corporates and outflows in NDF from RM. USDCOP traded higher on Friday mostly driven by outflows from RM and HFs in NDF and some cash outflows from RM. The move closed the currency above dMA55 for first time since March. COP has been mostly range trading between 4,050 and 4,150 driven by flows. Locally we have not seen major spot drivers. The forward curve finished correcting after the regulatory announcements. Nevertheless, the move lower had started thanks to outflows from RM in cash. The curve is now at May levels, which on Friday found some bids. Spot wise we are watching 4,100 as support and new resistance should be 4,155.
NY Open – Anticipation
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London market participants return from a long weekend, but are left waiting for bigger macro events this week. USD and US yields consolidated overnight as risk sentiment firmed. However trading volumes remain firmly below average. China state media and sources suggest that we are approaching peak bearishness, with renewed speculation for a RRR cut and mortgage relief. This buoyed China equities more than CNH. RBA Governor-to-be Bullock implicitly implied more rate hikes were possible. Ahead, we have second tier US data in the form of JOLTS job openings, Conf Board consumer confidence and Q2 Home Price Index. Expect a mixed bag, but limited market follow-through. HUF is in focus going into the central bank decision, with a 100bps cut to the 1d deposit rate widely expected and base rate unchanged. MXN gets economic activity data while CLP may see some recovery after Monday’s sell-off. |
USTs bull-steepen amid solid front-end auctions; ECB’s Holzmann advocates for “pushing on with rate increases”; Bunds bear-flatten, EUR gains after Holzmann’s remarks; China equities pare initial gains; COP underperforms all main EM and DM currencies; US 10y at 4.202% (-3.3bp).
Latin America:
The performance of LatAm currencies was broadly weaker, despite benign price action in USD and the commodities complex. CLP significantly underperformed not only its regional peers, but all the main EM and DM currencies, down 1.2% at ~855, despite the government’s recent announcement of the sale of US$2bn monthly into year-end. In contrast, COP closed ~0.4% stronger, and outperformed most of its EM peers, despite muted oil price action and a lack of new local developments. Colombia was also an outperformer in rates, as 5y IBR closed 11bp lower, at 8.04%. Long-end Brazil DI rates also outperformed, as January 2031s closed 8bp lower, at 10.95%. TIIE and CAM rates continued to underperform despite some relief in US rates.