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Summary – Local Currencies Feeling The Pinch From Weaker Sentiment

LATAM
  • ECB Governing Council member Klaas Knot said there’ll still be more than one half-point increase in interest rates, with the inflation situation remaining unsatisfactory. Investors, who’ve been softening bets on monetary tightening, may be underestimating the ECB’s commitment to tame prices, Knot told CNBC on Thursday. Policymakers are focused currently on the risk of doing too little, he said.
  • With major equity indices extending to the downside on Thursday, USDMXN is continuing to trade with a firmer tone. The weaker global sentiment notably weighed on the likes of MXN, BRL and CLP, all posting close to 1% losses on Wednesday amid the weaker US data and the late bounce for the greenback.
    • Yesterday’s low in USDCLP closely matched with 807.85, the Jun 3 low with the first resistance point not seen until 845.07, the 20-day EMA.
    • Both USDMXN and USDBRL are also posting interesting turnarounds from a technical perspective, failing just ahead of noted supports for the pairs at 18.5237 (2020 low) and 5.0108 (Aug 29/30 low and a key support) respectively.
    • Today, Brazil unemployment printed in line with expectations at 8.1%. Next up is Colombia & Argentina trade balances before Mexico retail sales data headlines Friday’s docket.
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