COP – USD caught a bid throughout the session today and sent the EM complex in the red. COP stayed rather resilient comparing to peers as the Saudi and Russia oil headlines lifted Brent above 90 and contained the COP selloff. Flows were mixed as our trader saw RM inflows in NDF space while Corps shown outflow interests.
NY Open – Central bankers are back
There’s a plethora of central bank decisions and headlines to digest, with a few FX exceptions. USDJPY approached 148 before FX official Kanda made his first verbal intervention since late July. MXN capitulation continues, with thin liquidity exacerbating the move. ECB speakers are trying to get the last word in before blackout, with known hawk Knot saying markets are underestimating the chance of a September hike. The BCCh cut by 75bps, but we see limited relief for CLP in the broader dollar environment.
The US calendar begins to pick up again with Fedspeak in the form of Collins at 08:30 EDT and ISM services at 10:00. Market participants continue to monitor the impact of $ corporate issuance. Both BoE and Riksbank governors are set to speak, and we may see more ECB headlines yet. The BoC decision at 10:00 EDT may be a non-event as we expect unchanged policy rates and guidance. The NBP decision is a close call, with our economists call for a dovish hold vs the first 25bps rate cut.
• Financial channel: CLP, THB and KRW currently have the highest beta to CNH and
have seen their betas increasing recently. Meanwhile, COP and MXN have seen the
opposite – their sensitivity to CNH has been falling recently and currently they
have some of the lowest betas to CNH
. BanRep offered longer-term repos to meet bank demand for
longer-term funding instruments. However, the onshore shortage of COP remains
far from being resolved, given government under-spending on the budget and the
central bank’s reluctance to take more aggressive measures, despite public
criticism from local banks. We continue to monitor this situation very closely, as it
has yet to be resolved