EM LATAM CREDIT: Ecuador: IMF Plans Next Review – Positive
(ECUA; Caa1/B-/CCC+)
• The IMF made some supportive comments about Ecuador at the latest press briefing today with spokesperson Julie Kozack. They were particularly supportive of the targeted fuel subsidy reform that has spurred widespread protests. They were concerned over recent unrest and encouraged dialogue.
• Bonds are off the highs set in mid-September with 35s last quoted 75.36, which was about 2 points higher since June 30th and about 20 points higher YTD. A successful resolution of the fuel subsidy issue would likely trigger a positive market reaction as it was estimated to save the govt over USD1bn, show progress towards economic and governance reforms, increase market confidence in the government and be encouraging to the IMF to continue to support the country.
• The Ecuador govt. has substituted a generalized fuel subsidy with targeted subsidies by paying drivers directly and making funds available for social programs. The IMF said that their studies of generalized fuel subsidies show they disproportionately benefit higher income groups and create vulnerabilities to corruption and smuggling, which is what Ecuador President Noboa has said as well.
• Kozack talked about setting up a timeline for the IMF’s next review and mentioned that in the latest review in July 2025 the country had been granted an increase in funding of about USD1bn to bring the total program to about USD5bn.
• There was no mention of a further increase in funding. Kozack acknowledged that investors viewed Ecuador as less risky but access to cap markets remained difficult in the near term.
• She said program performance has been strong, meeting all quantitative targets in Dec. 2024 and Apr. 2025. Challenges continued to be oil price volatility globally, increased natural disasters, security challenges and tighter external financing conditions.
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COMMODITIES: Crude Rises, Gold Hits Fresh Record High
- Crude has seen support today from continued Russian supply fears, recent strikes on energy infrastructure, and oil product strength, offsetting pressure from a stronger dollar.
- WTI Oct 25 is up by 2.5% at $65.6/bbl.
- Recent Ukrainian drone attacks shut down facilities accounting for at least 17% of Russia's oil processing capacity, or 1.1mn bpd, according to Reuters' calculations.
- OPEC+ will hold a meeting this weekend to decide on output for October.
- Despite today’s move, a bear cycle in WTI futures remains intact and recent gains are considered corrective.
- Initial resistance to watch is $66.56, the Aug 4 high. Key short-term resistance has been defined at $69.36, the Jul 30 high. A resumption of weakness would pave the way for a move towards $57.71, the May 30 low.
- Meanwhile, spot gold has also rallied by 1.5% to $3,529/oz, taking the yellow metal to a fresh all-time high.
- UBS said that investors are adding to gold allocations as Fed rate cuts loom, and they see gold making new highs in the coming quarters.
- Today’s gains in gold have resulted in a breach of key resistance at $3,500.1, the Apr 22 high, confirming a resumption of the primary uptrend and an extension of the sequence of higher highs and higher lows.
- The next objective is $3,547.9, a Fibonacci projection.
US: President Trump To Make 'Space HQ' Announcement Shortly
US President Donald Trump is shortly due to appear in the Oval Office to announce that US Space Command will be relocated from Colorado to Alabama, reversing a decision from former President Joe Biden not to move the command. LIVESTREAM
- Politico notes: "The decision ends a bitter yearslong turf war between Alabama and Colorado leaders over the best home for the unit. Each side argued the other benefited from politically motivated decisions by either Trump or Biden to reward states that voted for them."
- The Oval Office announcement is Trump's first public appearance since a Cabinet meeting last Tuesday. Trump's light schedule since that meeting has fueled social media speculation over his health, despite several trips to his golf course in Virginia and a regular stream of Truth Social posts.
- The announcement is likely to be accompanied by ad hoc remarks to the press on a range of issues. Treasury Secretary Scott Bessent told the Washington Examiner yesterday that Trump may declare a 'national housing emergency' this fall to address rising house prices – a ‘core issue’ for the Trump administration in the coming months.
- Bessent told Fox News in a separate interview that “all options are on the table” for further sanctions on Russia, after Trump’s first deadline for Russian President Vladimir Putin to make progress on peace talks with Ukraine passed yesterday.
USDJPY TECHS: Approaching Resistance
- RES 4: 151.62 61.8% retracement of the Jan 10 - Apr 22 bear leg
- RES 3: 150.92 High Aug 1 and a key resistance
- RES 2: 149.81 76.4% retracement of the Aug 1 - 14 bear leg
- RES 1: 148.79/149.12 Intraday high / 61.8% of Aug 1 - 14 bear leg
- PRICE: 148.12 @ 16:09 BST Sep 2
- SUP 1: 146.21 Low Aug 14 and bear trigger
- SUP 2: 145.86 Low Jul 24
- SUP 3: 145.40 50% retracement of the Apr - Aug upleg
- SUP 4: 145.19 Trendline drawn from the Apr 22 low
USDJPY traded higher Tuesday but for now, remains inside its range. Resistance to watch is 148.78, the Aug 22 high. It has been pierced, a clear break of it would highlight a range breakout and a stronger bullish theme. This would also undermine the recent bear threat. A breach would open 149.12, a Fibonacci retracement. The bear trigger lies at 146.21, Aug 14 low. Clearance of this level would resume a downtrend that started in August.
