EM LATAM CREDIT: LATAM Credit Market Wrap

Dallas Fed President Logan (2026 FOMC voter, hawk) made her current monetary policy leanings clear with the title of a speech delivered late Tuesday: "Why I’ll be cautious about further rate cuts" (link). She says "I supported the FOMC’s rate cut [in September] because it helped better balance the risk of slowing the labor market too much against the ongoing imperative to bring inflation back to the 2 percent target. However, I am also committed to finishing the job of sustainably restoring price stability."

• Even before this speech, we saw her as one of the 6 FOMC members who eyed no further cuts this year in the September Dot Plot.
• Logan sees policy as only "modestly restrictive", citing three observations: "First, even setting aside temporary effects of this year’s increases in tariff rates, inflation is not convincingly on track to return all the way to 2 percent. Second, aggregate demand remains resilient, supported by consumption, business investment and buoyant financial conditions. Third, while the labor market has undeniably slowed, with meaningful costs to workers, not all of the weakness represents economic slack that less-restrictive monetary policy can ameliorate."
• As such "There may be relatively little room to make additional rate cuts without inadvertently moving to an inappropriately accommodative stance." She repeats commentary from previous appearances citing and model-based estimates that suggest policy may not be far from neutral (ranging from 2.84 - 4.15%, putting the current Fed funds rate at the high end of that band).
• Re that distinction between labor market slowing and labor market "slack, she says that "a modest further increase in labor market slack is likely necessary to finish restoring price stability."
• Her concerns over underlying services inflation trends are noteworthy: "Most worrisome for the medium-term inflation outlook, non-housing services inflation should be relatively unaffected by tariffs, yet it has hovered near 3.4 percent over the past year. Non-housing services represents more than half of Americans’ aggregate consumption. My staff estimates that the current rate of inflation in this category is high enough to keep overall inflation above 2 percent by 30 to 40 basis points. Housing services inflation should come down some as rents reset. Core goods inflation has been elevated in part due to tariffs, an effect that should also dissipate. But even then, the persistence visible in non-housing services inflation would keep overall inflation from returning all the way to the 2 percent target." She also notes that "Tariffs also pose upside risk to inflation because of the way they tend to feed into prices over time."
• And she sees aggregate demand holding up, saying that financial conditions are playing a "tailwind" role: "Increasingly accommodative financial conditions are supporting aggregate demand, primarily through equity valuations that continue to reach new highs, but also through narrowing credit spreads and a weaker dollar. Indexes that estimate the economic impact of changes in a broad range of asset prices point to financial conditions prompting a meaningful boost to growth ahead."

• RES 4: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
• RES 3: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
• RES 2: 0.6660/6707 High Sep 18 / 17 and key resistance
• RES 1: 0.6628/29 High Sep 24/30 & Oct 01
• PRICE: 0.6602 @ 16:31 BST Oct 1
• SUP 1: 0.6527/21 61.8% of the Aug 21 - Sep 17 bull leg / Low Sep 26 
• SUP 2: 0.6484 76.4% retracement of the Aug 21 - Sep 17 bull leg
• SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger 
• SUP 4: 0.6373 Low Jun 23

The AUDUSD uptrend remains intact and recent weakness appears to have been a correction. Attention is on support at the 50-day EMA, at 0.6554. A clear break of this average would signal scope for a deeper retracement and expose 0.6527 once again (pierced), a Fibonacci retracement. For bulls, a stronger reversal higher would refocus attention on 0.6707, the Sep 17 high. Initial firm resistance to watch is 0.6628, the Sep 24 high.    

• Treasuries look to finish higher - off first half highs after September's ISM Manufacturing Report showed a slight if uneven improvement in sectoral activity. Rates initially gapped higher after much lower than estimated private ADP employment numbers.
• The ADP release for September was weak, showing the biggest private payrolls drop (-32k) since March 2023 and before that, Jun 2020. And the prior 54k was revised down to -3k, so the first back-to-back drops since the pandemic. This was a significant miss for private payrolls versus +51k expected.
• ADP was re-benchmarked, however, resulting in a reduction of 43,000 jobs in September compared to pre-benchmarked data. The trend was unchanged; job creation continued to lose momentum across most sectors."
• Underlying futures climbing again after paring back from late morning highs. Projected rate cut pricing gaining vs. late Tuesday levels (*): Oct'25 at -25.3bp (-24.2bp), Dec'25 at -46.9bp (-44.2bp), Jan'26 at -58.8bp (-53.7bp), Mar'26 at -70.0bp (-64.7bp).
• Thursday's scheduled economic data largely delayed/suspended due to the shutdown - weekly jobless/continuing claims as well as Factory New Orders will not be released
• In other news: Supreme Court rejects Pres Trump's firing of Fed Gov Cook - until at least an oral argument on the case is heard in January 2026. VP Vance expects federal layoffs to start in the next one to two days.