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Brazil Outstanding Loans Report, ECB Reiterate September Decision Hinges On Data

LATAM
  • The Brazilian central bank will disclose the May Outstanding Loans report with Uruguayan unemployment rate the only other data release on Wednesday. A moderate theme of softening inflation across G10 on Wednesday with lower-than-expected CPI reads in both Australia and Italy, potentially setting the tone for further Eurozone releases tomorrow and Friday.
  • ECB Vice President Luis de Guindos said that while another interest-rate increase next month is all but assured, the outcome of the following meeting remains unclear and will be determined by economic data arriving in the interim. Guindos told Bloomberg TV on Wednesday that underlying inflation pressures may prove to be more stubborn than currently expected, with a strong summer tourist season likely to drive services costs higher.
  • USD/CNH found a base around the time of the latest USD/CNY mid-point fixing, with a lack of firm steer vs. sell-side estimates allowing the pair to push higher. Ultimately, the market remains comfortable in pushing the envelope re: USD/CNH, even after yesterday’s signs re: policymakers becoming uncomfortable with the velocity of the recent move higher in USD/Yuan (via the mid-point fix and touted state bank sales of USD).
    • The MNI policy team noted that “the PBoC is expected to curb any sharp weakness in the yuan should a stronger-than-expected fixing for the onshore CNY fixing fail to slow its depreciation,” based on discussions with traders and policy advisors.

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