LATAM FX: Regional Currencies Extend Losses Amid Middle East Tensions
- Latam currencies continue to trade on the backfoot amid the rise in geopolitical tensions in the middle-east following Israel’s airstrikes on Iran overnight and Iran’s retaliatory action. CLP has fallen 1.2% against the dollar in early trade amid a pullback in copper prices, while MXN (-1.1%) and BRL (-0.9%) have fallen to new session lows in recent trade.
- Despite the move, the trend condition in USDMXN remains bearish, with potential still seen further out for a move to 18.7774, the 50.0% retracement of the Apr 9 ‘24 - Feb 3 bull leg. First resistance is at 19.2018, the 20-day EMA.
- USDBRL also maintains a bearish tone, with the pair still below the 5.60 level. Today’s gains have narrowed the gap to initial resistance at 5.6178, the 20-day EMA, however. Firm resistance to watch is 5.7632, the May 7 high.
- Meanwhile, USDCLP remains within its recent range, with a bear threat still present. Short-term gains are considered corrective, and scope is still seen for a move towards 914.00, the Mar 18 low. Resistance to watch is 961.64, the Apr 30 high.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
CROSS ASSET: Bund Block trade, US 10yr Yield tests 4.50%
Bund block trade, suggest seller
- RXM5 3.23k at 129.51.
Worth keeping an eye on the US Tnotes (TYM5), while Yesterday's low is at 109.30, the 4.50% Yield is circa 109.28+, now at 4.496%.
The Yen is unaffected still, but further breakout lower in TYM5 might provide some demand in USDJPY.
CANADA DATA: Canada Mar Building Permits Fall But Q1 Shows 5th Straight Increase
- March building permits -4.1% to CAD12.9B, StatsCan says Wed.
- Decline driven by non-residential sector -15% to CAD4.2B mainly due to a significant drop in commercial with Ontario posting more than half the decrease.
- Residential permits +2% to CAD8.7B on multi-family units, while single-family units -5.3%.
- Permits +15% YOY.
- On a quarterly basis, building permits +2.9% to CAD39.1B, fifth straight gain. Multi-family housing +9.6% to record high CAD17.3 billion, led by Vancouver projects.
GERMANY: Merz' Government Declaration Overall Close To Coalition Agreement
Chancellor Merz concluded his inaugural government declaration, overall remaining close to his CDU/CSU/SPD coalition agreement. Generally, he highlighted making competitiveness a key parameter in economic policy, preserving jobs in industrial manufacturing, and budget consolidation (increasing efficiency of measures) as key goals for his administration. Concrete measures announced include the below:
- Accelerated depreciation on private investment: 30% of acquisition costs deductible per year over 3 years, starting to reduce enterprise taxes in 2028
- Imposition of a 12-year infrastructure package
- New free trade initiative proposed in the EU (mentioning MERCOSUR, US)
- Enabling enterprise formation within 24 hours
- Reduction of reporting obligations for enterprises
- Introduction of an 'early start-retirement pension' (Frühstartrente; from 2026, children from age 6 receive E10/month in an individual, publically funded and privately managed retirement savings account. Fiscal costs costs would amount to ca. E1bln/year)
- CO2 pricing as a core component of climate policy, revenues should not flow into the budget but be distributed Sticking to European climate targets
- Maximum weekly working hours instead of daily maximum to increase labour flexibility
- Government believes the E15/h minimum wage by 2026 is achievable and desirable, but will not enshrine the goal in law - minimum wage commission remains in place
- "Trusting" the agricultural sector: Relying on voluntary action and personal responsibility of farms (this announcement saw a positive reaction in German chemical equities)
- Prioritizing integrating immigrants into the labor market as quickly as possible
- More collective bargaining in the labour market
- Intensify cooperation with Asian partners (mentioning China, some other APAC countries)
- Deepening cooperation with UK on defence
Next in the German domestic politics calendar will be finance minister's announcement of updated tax estimates tomorrow - Handelsblatt sources flagged this will result in a downward revision following lower GDP forecasts ('GERMANY: German Tax Revenue Estimates To Be Downwardly Revised - HB' - May 13).
