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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.
BRAZIL
- Renewed geopolitical tensions, surging stagflation risk and rising recession risks (particularly in Europe) have been supporting ‘safe-haven’ US Dollar since the beginning of April, with DXY testing the 104 psychological level.
- We saw that Latam currencies have been retracing sharply lower since the start of Q2 after registering strong gains in the first quarter (particularly), mainly driven by the aggressive tightening cycle run by central banks and the elevated nominal yields.
- In addition, the CNY weakness has also been weighing on EM currencies since the middle of April.
- EM FX have historically been sensitive to periods of significant CNY depreciation as FM portfolio managers reassess their risk when implied vol on the yuan surge following the August 2015 ‘CNY devaluation’ that generated a market shock (SP500 was down 10% following that event).
- BRL is down nearly 8% in Q2 against the USD; USDBRL broke above the psychological 5 resistance earlier this month and is now approaching its 100DMA at 5.1820.
- The BRL weakness (USD Strength) has been weighing on Brazilian equities; the chart below shows the strong co-movement between USDBRL and the Ibovespa in the past two years.
Source: Bloomberg/MNI
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.
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