CHILE: JP Morgan Still OW CLP Despite Copper Tariff Threat
Jul-11 14:24
- In the face of the US copper tariff threat, JP Morgan remains OW CLP, believing that the combination of asset repatriation potential, upcoming elections and continued favourable terms of trade will be positive forces for the peso going forward. They are also MW PEN, and MW Chilean and Peruvian local bonds in the GBI-EM Model Portfolio.
- In their view, medium-term drivers such as fiscal consolidation, a highly discussed theme in Chile's election campaigns, and higher private investment if de-regulation efforts are pursued, could further enhance the positive outlook for the peso.
- They note that the bulk of copper exports from both Chile and Peru are primarily directed towards China and other countries, rather than the US. Indeed, only 15% of Chilean copper exports and just 2% of Peruvian ones are destined for the US, reducing to some extent the potential first-order impact of the likely soon-to-be imposed tariffs.
- In addition, the copper supply curves seem rather inelastic in Chile and Peru, suggesting that export volumes are unlikely to materially shift on the back of the expected changes in pricing.
- Terms of trade are likely to remain highly favourable for both, with Chile and Peru printing current account balances of -1.6% and +2.3% of GDP, respectively, the highest in over a decade.
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US: Bessent Says "Rebalancing" Between US And China Is Possible
Jun-11 14:22
US Treasury Secretary Scott Bessent is delivering testimony to the House Ways and Means Committee on President Donald Trump’s tax and trade agenda and the President’s budget request for FY26. The hearing is ongoing. Questions from lawmakers are likely to be dominated by the trade framework struck with China in London. LIVESTREAM
- Per prepared remarks, Bessent said in his opening address: “…Treasury has just completed its most successful tax filing season in years—and we did so while improving efficiencies and cutting costs at the IRS.”
- Bessent noted that, “April receipts this year were up 9.5% over the previous year. And receipts in May were up 14.7% over the previous year... against the backdrop of one of the most consequential tax proposals ever to come before Congress,” referring to the One Big Beautiful Bill.
- Bessent said OBBB, "will make the 2017 tax cuts permanent," adding: “The legislation will provide 100% expensing for new factories, as well as existing factories that expand operations and support Made-in-America. And it will streamline burdensome permitting processes...”
- On trade, Bessent touted “the historic US-UK trade deal,” which he claimed “is a preview of what’s to come. Dozens of countries have engaged the administration thus far with offers to improve their trade relations with the United States. This includes China.”
- On China, Bessent said: “If China will course-correct by upholding its end of the initial trade agreement we outlined in Geneva last month, then a big, beautiful rebalancing of the world’s two largest economies is possible.”
EURIBOR OPTIONS: Put Condor buyer
Jun-11 14:16
ERH6 98.0625/98.00/97.9375/97.875p condor, bought for 1.5 in 8k.
FOREX: FX Exchange trade Roll pace update
Jun-11 14:04
FX Exchange traded Rolls dominates, at least over 75% of the front Month in EURUSD is spread related. Expects these to be all but done on Friday.
- EUR: 55%.
- GBP: 44%.
- JPY: 55%.
- CHF: 42%.
- CAD: 38%.
- AUD: 46%.
- NZD: 38%.
- SEK; 38%.
- NOK: 47%.
