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Morgan Stanley on BanRep: Risks Skewed Towards Earlier Lift-Off

COLOMBIA
  • Current forecasts incorporate the first hike in September. Skewed risks to an earlier hike should not materialise as early as this meeting, more likely July.
  • Note that market pricing incorporates a full 25bp hike at the upcoming meeting in July and a total of 90bp of hikes before year-end.
  • Given this, they would not expect a surprise 25bp hike in June to trigger material gains in COP. They continue to see the external backdrop as the most important driver of the currency, in light of Colombia's sizeable twin deficits. Given their expectation of more USD strength in the coming weeks, MS stick to long USD/COP positions as a broader portfolio hedge.

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