ARGENTINA: Argentina (ARGENT; Caa3pos/CCC/CCC): IMF and Lifting of Capital Co
“Federico Furiase, director of the Central Bank: "There is no devaluation; the fundamentals are for the dollar to move toward the floor of the band." “- Infobae
Positive for prices
• Most of the details of the approved IMF agreement were as expected with USD20bn total size, initial disbursement USD12bn (at the high end of our USD10-12bn range) and an accommodative IMF leaving the Argentina government flexibility of when to adjust the FX regime.
• We expected support from the World Bank and the IDB of about USD6bn, which we got, but were pleasantly surprised by the much larger total size of the program for the next few years of USD30bn.
• The additional USD2bn from the IMF to be released in June was also a pleasant surprise.
• The much larger support enabled the government to accelerate its timetable for the lifting of capital controls to start April 14, 2025. The crawling peg is gone and replaced with a managed float with the ARS/USD band to be maintained at 1000-1400 and to widen out over time.
• We believe the lifting of capital controls is positive as it will encourage selling of USD by exporters if the FX rate is attractive enough so that the government can rebuild its reserves.
• Business leaders were emphatically positive about the lifting of capital controls and that will encourage further investment and help to generate hard currency over time.
• Further free market reforms and a persistent budget surplus will work to reduce inflation over time. Inflation disappointingly accelerated in March to 3.7%, boosted by education (the start of the school year is in March) and food prices.
• Access to international markets is critical but we don’t think that would be likely or desirable until after the midterm elections in October as investors need reassurance that reforms can continue. We should look for sovereign bond yields to fall below 10% before an issuance is contemplated, based on guidance a government official reportedly gave earlier in the year.
• Argentina bonds were last quoted USD59.57, down 3 points since March 2025 month end and 10 points lower than the peak of USD69 January 2025. The market feared a weaker ARS so that was priced in. The lifting of capital controls as well as the huge support from the development banks should be very supportive of bonds and we could see a retesting of the peak made earlier this year.
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US STOCKS: Late Equities Roundup: Chip Stocks Leading, Awaiting Senate Vote
- Stocks are drifting near midday highs late Friday, awaiting word from the Senate as they vote on "H.R. 1968" -- Full-Year Continuing Appropriations and Extensions Act, 2025. Stocks had bounced off yesterday's six-month lows after NY Senator Schumer (D) said he would not block the GOP spending bill in order to avoid an imminent government shutdown.
- Currently, the DJIA trades up 625.95 points (1.53%) at 41444.63, S&P E-Minis up 104.5 points (1.89%) at 5632.25, Nasdaq up 416.9 points (2.4%) at 17720.3.
- Information Technology and Energy sectors continued to lead gainers in late trade, AI-tied demand helping semiconductor makers rally: Palantir Technologies +8.18%, Western Digital +6.19%, Micron Technology +5.55%, Super Micro Computer +5.22%, Adobe +4.45% and NVIDIA +4.08%.
- A broad based rally in the Energy sector led by oil and gas stocks: Targa Resources +4.15%, Coterra Energy +3.59%, Phillips 66 +3.28%, Schlumberger +3.08% and Diamondback Energy +2.99%.
- Broadline retailers weighed on the Consumer Staples sector in late trade: Kroger -2.03%, Kenvue -1.77%, Dollar Tree -1.50% and Dollar General -0.91%. Meanwhile, biotech and pharmaceuticals weighed on the Health Care Sector: Abbott Laboratories -2.69%, Bristol-Myers Squibb -2.45%, Regeneron Pharmaceuticals -2.21% and Gilead Sciences -1.91%.
FOREX: Cross/JPY Boosted, USDMXN Trades to Four-Month Low Below 20.00
- Friday’s session was characterised by a strong rally for the Euro, as headlines suggested Germany have found a solution to the debt brake passage. EURUSD rose from around 1.0850 to 1.0912 following the news, falling short of most recent cycle highs which reside at 1.0947.
- With the associated move higher for European yields, it is the low yielding JPY and CHF which have really felt the pinch, with EURJPY and EURCHF rising 0.7% and 0.55% respectively.
- Overall, there was considerably more optimism across global markets, as major equity indices rose around 1.5% on both sides of the Atlantic. This allowed the likes of AUD and NZD to outperform G10 peers. UK economic data out this morning surprised to the downside, with GDP surprisingly contracting in January while industrial and manufacturing production data came in well below forecast. GBP is notably softer as a result.
- Rengo pay tallies in Japan have again proved market moving - while unions are set to demand a faster pace of pay rises this year (5.46% from 5.28%), the final demand may turn out lower than many surveys had estimated - undermining the JPY. The firmer risk sentiment has seen the likes of AUDJPY and NZDJPY surge over 1%, entirely reversing yesterday’s misfortunes.
- Following the breach of key support on Thursday around 20.13, USDMXN has continued to grind lower during today’s session, and the clean break highlights the growing potential for a stronger reversal lower. The pair is 1% lower on the session as we approach the close, trading at the lowest level for four months, around 19.88. Below here, attention turns to the lows seen in the aftermath of the election results at 19.7618, while resistance moves down to 20.3851, the 50-day EMA.
- Activity data in China is scheduled on Monday’s, before US retail sales headlines the economic data calendar. Next week, will see a plethora of central bank decisions, including the Fed and BOJ.
US: Americans Express Increased Economic Pessimism - CNN
A CNN/SSRS survey has found that, “Americans split evenly over whether economic conditions a year from now will be good (49%) or poor (51%), but the share saying they expect the economy to be in bad shape a year from now is up 7 points since January, just before Trump took office.”
- The report notes: “About half of the public, 51%, say they think Trump’s policies have worsened economic conditions and just 28% that they have improved things. Another 21% say they’ve had no effect on the economy.”
- RealClearPolitics, an outlet seen as slightly more favourable to the GOP, notes that Trump's net approval rating (net -0.7%) has crossed into negative territory for the first time.
- Nate Silver's tracker shows Trump with a net approval rating of net -1.4%.
Figure 1: "Thinking about a year from now, do you expect economic conditions in this country will be:"
Source: CNN/SSRS
