Political uncertainty in Portugal has sent the country’s yields soaring upwards (5yr CDS rose nearly 100bps overnight to 500bps overnight), re-igniting concerns over peripheral Europe, and sending markets into another tail‐spin. In addition, EM could be facing some “geo-political headwinds” as citizen protests have spread in a number of countries (Egypt, Brazil, Turkey), providing additional fuel for sentiment deterioration on top of the sell‐off triggered by Fed policy shift expectations. With the USD broadly stronger, and risk assets seeing continued pressure, we expect LATAM FX to open with a softer bias, although the moves by “LATAM FX overnight proxy, MXN (which is ‐0.5% vs the greenback overnight), suggest the moves will be moderate.
Read the full report: FX Daily
Scotiabank