EM LATAM CREDIT: LATAM Credit Market Wrap

• Average hourly earnings are seen increasing 0.3% M/M in December which would be enough for a one tenth acceleration in the Y/Y to 3.6%, against a backdrop of steady average weekly hours worked at 34.3.
• Primary dealer analysts see a clear skew towards a dovish surprise though, with estimates in a 0.1-0.3% M/M range.
• The two months of average hourly earnings data in last month’s release were a mixed bag rather than the outright weakness that the headlines suggested, with non-supervisory employee wage growth running firmer and hours worked also increasing in November.
• Overall AHE growth of 0.14% M/M in November was clearly softer than the 0.3% M/M widely expected although it was countered by a stronger than expected 0.44% M/M in Oct (we had seen limited estimates with a median 0.3 but with risks skewed lower). Still, September was also revised lower to 0.19% M/M vs the previously estimated 0.25% M/M. The combination meant the Y/Y rate surprised lower, with 3.51% Y/Y (cons 3.6) after 3.75% in Oct for a fresh low since May 2021.
• Non-supervisory earnings painted a stronger picture however, at 0.35% M/M in Nov after 0.41% M/M in Oct and only a marginally downward revised 0.22% (initial 0.25%) in Sep. This typically less volatile category that captures about 80% of employees accelerated to a three-month high of 3.86% Y/Y from 3.81%.

• RES 4: 1.3950 61.8% retracement of the Nov 5 - Dec 26 bear leg     
• RES 3: 1.3925 Low Dec 4
• RES 2: 1.3892 50.0% retracement of the Nov 5 - Dec 26 bear leg   
• RES 1: 1.3844 50-day EMA 
• PRICE: 1.3809 @ 15:34 GMT Jan 7
• SUP 1: 1.3701/3643 Low Jan 2 / Low Dec 26 and the bear trigger
• SUP 2: 1.3637 Low Jul 25
• SUP 3: 1.3576 Low Jul 23
• SUP 4: 1.3540 Low Jun 16 and a key M/T support   

A bear theme in USDCAD remains intact and the latest recovery is considered corrective - for now. The pair has traded through the 20-day EMA, and this signals scope for a stronger corrective bounce. Attention is on the next important resistance at 1.3844, the 50-day EMA. A clear break of the 50-day average would highlight a stronger reversal. Key short-term support and the bear trigger has been defined at 1.3643, the Dec 26 low.      

• Treasuries look to finish stronger, upper half of a relatively volatile session range on heavier volumes (TYH6 over 1.8M) after the bell, curves bull flattening: 2s10s -3.941 at 66.838, 5s30s -2.641 at 112.372.
• Midweek data dump kicked off with monthly ADP - Treasury futures extend gains after ADP employment data came out lower than expected (prior drop up-revised slightly). Futures paring gains after stronger than expected ISM services, new orders and employ print, prices paid declines slightly; JOLTS openings & layoffs retreat while quits levels rise.
• Job openings ended November much lower than expected at 7146k (cons 7648k) after a downward revised 7449k in Oct (initial 7670k) and 7658k in Sep. It’s the lowest level of openings since Sep 2024 and before that Dec 2020.
• December's ISM Services report was meaningfully stronger than expected, with the headline PMI index surprisingly jumping to a 14-month high 54.4 (52.2 consensus, 52.6 prior). This was a strong report across the board, with all four major subindices in expansionary territory (Business Activity, New Orders, Employment, Supplier Deliveries) for the first time since February 2025, and a further downtick in price pressures.
• Some posts from Pres Trump rattled equities somewhat, at least housing and defense stocks after he pushed to ban large institutions from buying single-family homes, and warned defense contractors and the industry as a whole that executives should be prevented from making more than $5M annually, while the sector should be barred from allowing dividends and share buybacks.
• FX markets have been lacking conviction to start the year, potentially in anticipation of this Friday’s US employment report.