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Free AccessJP Morgan Continue To Favour High-Carry Latam FX
- JP Morgan remain constructive on Latam FX, assuming a backdrop where a resilient US economy decelerates sufficiently to prompt Fed cuts, while avoiding a sharp recession. They continue to favour high-carry currencies with solid macroeconomic fundamentals such as BRL, MXN and UYU, while being more cautious on those where rate differentials are set to compress more swiftly and fiscal or external balances are deteriorating, such as COP (UW) and CLP (MW).
- JPM are MW CLP and for now they are not looking to fade CLP weakness, given low carry and commodities risks warrant some extra risk premium. However, they do think risk-reward is unappealing for peso shorts at these levels. Elsewhere, they recently closed an OW to PEN, as it could be more vulnerable to softer commodity prices now that real rates are the lowest in the region.
- JPM remain OW MXN, given Banxico’s cautious stance. High real rates give Banxico space to start cutting, but JPM do not expect it to become too aggressively dovish and markets might struggle to go beyond the 180bp of cuts already priced. They still prefer to be OW MXN rather than rates, where they are neutral.
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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.