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Higher US Yields Weighing on Regional Currencies Post US Data

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  • A firmer-than-expected Q1 employment cost reading provides the latest ‘hawkish’ input for FOMC-dated OIS, leaving ~33bp of cuts priced through ’24 vs. ~35bp pre-release. The higher US yields are underpinning Tuesday’s greenback strength, noticeably weighing on LatAm currencies to start the session.
  • As such, USDMXN rose back above 17.00 and stands in moderate positive territory, although the trend so far this week has seen a gradual move lower as last week’s spike in volatility settles. USDBRL and USDCLP are outperforming, both rising 0.70.
  • As a reminder, the latest pullback for USDBRL had been considered technically corrective and today’s bounce takes us back above the 20-day EMA. The strong impulsive nature of the latest rally since mid-April signals scope for a climb towards 5.3330, 76.4% of the Nov 11 ‘23 - Jul 28 ‘23 bear leg.
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  • A firmer-than-expected Q1 employment cost reading provides the latest ‘hawkish’ input for FOMC-dated OIS, leaving ~33bp of cuts priced through ’24 vs. ~35bp pre-release. The higher US yields are underpinning Tuesday’s greenback strength, noticeably weighing on LatAm currencies to start the session.
  • As such, USDMXN rose back above 17.00 and stands in moderate positive territory, although the trend so far this week has seen a gradual move lower as last week’s spike in volatility settles. USDBRL and USDCLP are outperforming, both rising 0.70.
  • As a reminder, the latest pullback for USDBRL had been considered technically corrective and today’s bounce takes us back above the 20-day EMA. The strong impulsive nature of the latest rally since mid-April signals scope for a climb towards 5.3330, 76.4% of the Nov 11 ‘23 - Jul 28 ‘23 bear leg.