EM LATAM CREDIT: Credit Update: Raizen SA (Baa3/BBB/BBB)

• Building on what our policy team wrote on the Canadian trade data earlier today, the merchandise trade deficit was smaller than expected in November at C$0.3bn (cons C$0.9bn) after a downward revised C$0.5bn (initially C$0.9bn).
• It left a three-month annualized deficit of circa 0.3% GDP after the 0.5% previously.
• The services balance meanwhile keeps to a much healthier position than previously seen after recent revisions, worth a deficit of just 0.1% GDP when averaged over the past three months.
• Combined, the goods & services deficit was circa 0.4% GDP annualized in the three months to November. From a trend perspective it’s weaker compared to surpluses that peaked around 0.5% GDP in late 2023 but it’s still favorable in light of the 1-3% deficits typically run in pre-pandemic years.
• With Canada-US trade relations so keenly in the spotlight, the Canadian merchandise trade surplus to the US increased from C$6.6bn to C$8.2bn in November and continued to equate to 3.3% GDP on a twelve-month running basis.
• The latter is down from a recent high of 4.5% GDP in mid-2022 but remains notably above the 2% GDP averaged through the first Trump administration. 

MNI spoke with the head of the ISM's service survey about the outlook under the Trump administration. On Main Policy Wire now, see sales@marketnews.com for details.

• The US dollar pared initial losses on Tuesday, as both US ISM Services data and Jolts Job opening beat consensus expectations. The USD Index is up 0.15% on the session, although notably the DXY still sits just below the levels before the release of the WaPo tariff article during Monday trade.
• EURUSD has echoed this sentiment with the early push back above 1.04 being met with solid resistance around Monday’s highs ~1.0435. Spot trades closer to 1.0370 as we approach the APAC crossover and will look to the old November low at 1.0335 as initial support.
• Despite being unchanged on the session, USDJPY has traded with significant volatility with multiple two-way intra-day swings. Overnight, the pair traded multi month highs of 158.42, before encountering comments from the Japanese Finance Minister around excessive FX moves which halted the yen’s decline and saw USDJPY print a session low of 157.38.
• The US data then took us back to exactly the match the highs, before the pessimistic price action in equities led the pair lower once more to current levels around 157.70.
• In similar vein, both AUD and NZD spent the European session outperforming before risk off sentiment drove both these currencies back to unchanged levels ahead of the close.
• The Swiss franc is a touch softer on the session following a lower-than-expected core inflation print, with EURCHF briefly trading up to a near 2-month high around 0.9440. USDCHF has risen 0.35%, and is reapproaching the 0.91 handle, with medium term targets of 0.9158 and 0.9250 well defined.
• Australia CPI highlights the APAC calendar on Wednesday, before focus will turn to US ADP employment, jobless claims and the release of the December Fed meeting minutes.