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HSBC Close Long MXNCLP, But Open Short USDUYU, Target 37.80

LATAM FX
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  • HSBC close their buy MXNCLP 1m NDF trade idea at the stop loss of 54.10 for a negative performance of 1.5%. While the MXN performed well, CLP rallied on the back of a 6% jump in copper prices since the trade idea's inception. The market also believes the BCCh will decelerate the pace of rate cuts on the back of more cautious comments from Governor Costa in recent weeks.
  • That said, HSBC continue to believe MXN will see moderate gains in the weeks ahead thanks to a reduction in volatility coupled with high carry. They do not expect CLP to rally further, barring additional moves higher in copper prices, given that doves on the central bank board will push for a continuation of the 50bp easing pace for longer, thanks to the stronger CLP. HSBC see USDCLP at 910 by year-end.
  • Meanwhile, HSBC open a sell USDUYU 1m NDF at 38.61 with a target of 37.80 and a stop-loss of 38.90. The Uruguayan peso remains their top conviction. They note that Uruguay is witnessing a sharp improvement in the balance of payments on the back of a better harvest and strong beef exports, alongside signs of a large FDI pipeline. They also believe the central bank has ended its rate cutting cycle for now.
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  • HSBC close their buy MXNCLP 1m NDF trade idea at the stop loss of 54.10 for a negative performance of 1.5%. While the MXN performed well, CLP rallied on the back of a 6% jump in copper prices since the trade idea's inception. The market also believes the BCCh will decelerate the pace of rate cuts on the back of more cautious comments from Governor Costa in recent weeks.
  • That said, HSBC continue to believe MXN will see moderate gains in the weeks ahead thanks to a reduction in volatility coupled with high carry. They do not expect CLP to rally further, barring additional moves higher in copper prices, given that doves on the central bank board will push for a continuation of the 50bp easing pace for longer, thanks to the stronger CLP. HSBC see USDCLP at 910 by year-end.
  • Meanwhile, HSBC open a sell USDUYU 1m NDF at 38.61 with a target of 37.80 and a stop-loss of 38.90. The Uruguayan peso remains their top conviction. They note that Uruguay is witnessing a sharp improvement in the balance of payments on the back of a better harvest and strong beef exports, alongside signs of a large FDI pipeline. They also believe the central bank has ended its rate cutting cycle for now.