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MNI BRIEF: BCB Gov-2025 Expectations Jump To Affect Forecasts

(MNI) BRASILIA

Brazil's Central Bank governor Roberto Campos Neto said several factors are contributing to this unanchoring, such as fiscal policy and BCB credibility.

LATEST INSIGHT

MNI EGB Issuance, Redemption and Cash Flow Matrix – W/C 27 May, 2024

The EU, Belgium, the Netherlands, Italy, Germany and Finland all look to hold auctions in the upcoming week. On the syndication side, we see Spain as the most likely candidate to hold a syndication in our view.

MNI Credit Weekly: Supply Down But Not Out

Supply Down But Not Out As IG Moves To 2024 Tightest Levels

MNI: Stickier Prices Amplify Fed's 'Last Mile' Problem -Paper

New Fed and academic research re-examines the tradeoffs between unemployment and inflation.

MNI: Fed’s Waller Says Large Deficits Could Push Up R-Star

Fed governor says U.S. is on unsustainable fiscal path, which could raise neutral rates.

Political Risk

G7 Draft Communique Looking At ‘Harmful’ Trade Practices - Bloomberg

  • MNI (London) - Bloomberg reports that a draft communique formulated at the G7 meeting looks to challenge “harmful practices” and China’s role in world trade, an introduction of much stronger common language compared to that from a year ago in Japan or last month in Washington.
  • “We will advance our cooperation to enhance global economic resilience and economic security and protect our economies from systemic shocks and vulnerabilities,” officials say in the document seen by Bloomberg. “To this end, we will work to make our supply chains more resilient, reliable, diversified and sustainable and to respond to harmful practices, while safeguarding critical and emerging technologies.”
  • Also of note, Bloomberg’s own analysis on the report is that “While fiscal matters didn’t feature prominently on the agenda of the G-7, the ministers do seem to be coalescing on the need to repair public finances in the medium term at a time when most member countries face mounting loads on debts that already exceed 100% of output, sometimes considerably so.”

Sheinbaum Maintains Dominant Position In Presidential Race

Claudia Sheinbaum, representing the ruling Morena Party of President Andres Manuel Lopez Obrador, remains the overwhelming favourite to win the June 2 Mexican presidential election - ahead of main opposition rival Xóchitl Gálvez - despite a moderate dip in the polls this month.

  • Prediction market data from Polymarket shows that Sheinbaum is given an 89% implied probability of winning, down from close to 95% for much of the year. In the same period, Gálvez has jumped from a 4% implied probability to close to 15%.
  • Polling aggregator Oraculus notes that Sheinbaum is polling at 56% in May. A strong lead over Gálvez who is polling at 34%, but slightly lower than the 61% Sheinbaum enjoyed earlier in the year.
  • Sheinbaum's slight downtick may reflect widespread protests at severe drought conditions which have affected much of country. Reuters reports that Sheinbaum, "aims to overhaul water governance in the agriculture sector, the top user of the country's scarce supply, with a potential investment of 20 billion pesos ($1.2 billion) per year."
  • AP notes: "40% of the country’s dams are below 20% of capacity, and another 40% are between 20 and 50% full. Mexico City has been forced to reduce water supplies because the reservoirs that feed the city are drying up."

Figure 1: Mexican Presidential Election Forecast, % Implied Probability

Source: Polymarket/Realtime

No Invitation For Ukraine To Join NATO Expected At Leaders Summit

US Assistant Secretary of State for European and Eurasian Affairs James O'Brien told reporters that the US does anticipate an invitation will be extended to Ukraine to join the NATO alliance at the NATO Leaders Summit in Washington D.C. in July, according to Reuters.

  • O'Brien noted that although an invitation is unlikley, "there will be a substantial show of support," for Kyiv.
  • O'Brien commented on today's news that Russian President Vladimir Putin is, "ready to halt the war in Ukraine with a ceasefire that recognises the current battlefield lines." (Sky News) O'Brien said the US, "does not see [Putin] as being interested in peace now."
  • US Secretary of State Antony Blinken will travel to the Czech Republic next week for an informal meeting of NATO foreign ministers in Prague to discuss priorities for the July summit; continued support for Ukraine, defense modernization, and deepening energy ties.
  • Notably, Blinken will also travel to Moldova for a meeting with Moldovan President Maia Sandu to discussion EU accession and energy security.
  • Moldova is set to hold presidential elections and a referendum on its future in the European Union on October 20, with some some concerns that Russia could see the election as an opportunity to exert influence, or subvert the election to oust pro-EU Sandu in favour of pro-Russian opposition.
  • Chatham House notes: "...revisionist speeches from the Russian president, the Kremlin’s actions and official doctrines all suggest that Russia sees Moldova as ‘a historical Russian territory,’" in a similar way it does Ukraine.

MNI POLITICAL RISK - US Elections Weekly - 24 May

  • Welcome to a new weekly MNI Political Risk newsletter. This mailer will run through the 2024 US general election with updates on the presidential election race, the race for control of the Senate and House of Representatives, and political trends that could impact the election.
  • The 2024 presidential election is set to be one of closest in modern US history. The electorate is faced with two divisive candidates who have struggled to motivate enthusiasm amongst their core bases. Incumbent President Joe Biden is labouring under concerns over his age and mental acuity, backlash to inflation, and fissures within his 2020 progressive alliance over policy in the Middle East.
  • Former President Donald Trump is facing four criminal prosecutions and a relatively bare campaign war chest which has hampered his ability to attend campaign events and generate the same grassroots buzz which drove his 2016 campaign.
Full article: US Elections Weekly

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