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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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Free AccessLATAM FX: Goldman Sachs Says Case for Carry Accrual Remains Compelling
- As political noise out of EM gradually decreases and before the US election is more squarely in focus, Goldman Sachs think there could be a window of stability that is conducive to EM carry longs, especially as the US data mix continues to point to a benign softening of economic activity. GS recommend going long MXN and COP versus EUR with a total return target of 106 and a stop of 97. The 12-month carry of this trade is just over 7%.
- Both MXN and COP have already appreciated over the last few days, making for a less attractive entry point. However, GS think that the case for carry accrual with some potential spot upside in these currencies remains compelling.
- They continue to believe the more recent stabilisation in MXN, together with still strong economic fundamentals (high FX carry included) make it an attractive trade from a total return perspective, especially as the local news flow has turned marginally more supportive. Similarly, GS think that the COP sell-off is not fully justified by fundamentals, especially when looking at its divergence relative to oil prices. Moreover, BanRep remains cautious in its easing cycle.
- The main risk to this trade is a sharper slowdown in US activity that dampens risk sentiment, though EUR funding should help neutralise part of that risk.
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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.