MNI BOK WATCH: More Evidence Needed To Cut Rates, Says Rhee

MNI: PBOC Conducts CNY2 Bln Via OMO Thurs; Liquidity Unchanged

CHINA PBOC CONDUCTS CNY2 BILLION VIA 7-DAY REVERSE REPOS THURS

MNI: PBOC Sets Yuan Parity Lower At 7.1339 Thurs; -1.06% Y/Y

CHINA SETS YUAN CENTRAL PARITY AT 7.1339 THURS VS 7.1342

MNI BRIEF: Bank of Korea Keeps Policy Rate At 3.50%

Activity data stronger-than-expected; little impact on near-term monpol

MNI: GERMANY JUNE FINAL HICP +2.5 % M/M, +0.2% Y/Y

MNI: GERMAN JUN CPI +2.2 % Y/Y

RPT-MNI: Canada Sticks To Fiscal Anchors, Spends Chunk Of Windfall

MNI BRIEF: Poilievre Calls QE 'Scam' And Would Limit BOC Remit

© 1982-2024 MNI. All rights reserved.
Terms | Privacy
Log Out
Free Trial

HSBC Open Short EUR-BRL 2M NDF Trade Idea

BRAZIL
BulletEM BulletEmerging Market NewsHomepage
  • HSBC have opened a trade idea to sell EUR-BRL 2M NDF at 5.6285 with target of 5.42 and a stop-loss of 5.68. They note that BRL has struggled recently on the back of higher US rates, fiscal deterioration, policy intervention, and floods in Rio Grande do Sul. However, they believe that key positive attributes of the BRL story remain in place, above all, high real rates and strong external accounts, despite lingering risks.
  • In addition to real rates remaining among the highest in EM, HSBC expect the trade balance to stay near record levels thanks to further oil and protein export growth. A current account deficit below 1.5% of GDP will be easily financed by FDI flows of around 2%. They also expect fiscal and policy risks to be more manageable ahead. Finally, HSBC note that positioning has become cleaner as local investors have trimmed their bullish BRL positions substantially.
  • Meanwhile, HSBC sees further EUR weakness ahead, in part because the market may be under-pricing the risk the ECB leaves the door open to a July rate cut following the fully priced June move. They note that risks to the trade include the market pricing further BCB rate cuts, further intervention in SOE’s by the Brazilian government and hawkish ECB guidance.
209 words

To read the full story

Close

Why MNI

MNI is the leading provider

of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.

Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
  • HSBC have opened a trade idea to sell EUR-BRL 2M NDF at 5.6285 with target of 5.42 and a stop-loss of 5.68. They note that BRL has struggled recently on the back of higher US rates, fiscal deterioration, policy intervention, and floods in Rio Grande do Sul. However, they believe that key positive attributes of the BRL story remain in place, above all, high real rates and strong external accounts, despite lingering risks.
  • In addition to real rates remaining among the highest in EM, HSBC expect the trade balance to stay near record levels thanks to further oil and protein export growth. A current account deficit below 1.5% of GDP will be easily financed by FDI flows of around 2%. They also expect fiscal and policy risks to be more manageable ahead. Finally, HSBC note that positioning has become cleaner as local investors have trimmed their bullish BRL positions substantially.
  • Meanwhile, HSBC sees further EUR weakness ahead, in part because the market may be under-pricing the risk the ECB leaves the door open to a July rate cut following the fully priced June move. They note that risks to the trade include the market pricing further BCB rate cuts, further intervention in SOE’s by the Brazilian government and hawkish ECB guidance.