LATAM FX: STRUGGLES TO CATCH A BREAK – ING
One might have thought that in a world of lower US interest rates and a broadly weaker dollar, the Latin currencies could have started to do a little better. But no, both USD/MXN and USD/BRL bucked the USD trend yesterday and rallied, ING’s FX strategist Chris Turner notes.
More pain for the Peso, stay bearish on the Real
We had mentioned previously that we thought USD/MXN would struggle to trade under 18.50 because of constitutional reforms being discussed in September. However, it also seems that the Peso is still very much driven by USD/JPY trends. Instead of seeing the weaker dollar, USD/MXN sees the stronger JPY – i.e. carry trade dynamics still dominate. Given we're bearish USD/JPY into September, this suggests more pain for the Peso.
For the Brazilian Real, comments from the central bank that it might not deliver on the market's pricing of rate hikes was a key driver yesterday. Additionally, we are still waiting on the government's 2025 budget plans on 31 August. Doubts remain as to whether the government is prepared to cut spending enough to stabilise the debt trajectory. And we would stay bearish on the Real unless the government surprises with some fiscal consolidation.
Disclaimer: The content above represents only the views of the author or guest. It does not represent any views or positions of FOLLOWME and does not mean that FOLLOWME agrees with its statement or description, nor does it constitute any investment advice. For all actions taken by visitors based on information provided by the FOLLOWME community, the community does not assume any form of liability unless otherwise expressly promised in writing.
FOLLOWME Trading Community Website: https://www.followme.com
Hot
No comment on record. Start new comment.