Halister News

(Bloomberg) -- U.K. July PMI manufacturing est. 49.1 vs prev 49.1.

(Bloomberg) -- Seasonals do not look supportive for EUR breakevens in August while negative carry in September is also likely to weigh in the near-term, Citigroup strategists including Aman Bansal write in client note.

• Do not think lack of supply will be enough for a further meaningful rally in breakeven
  • Germany and France do not hold linker auctions in August and Italy has canceled end-August auction
• Sell OATei27 breakeven vs Bundei26 at 23bp; target 10bp, stop 30bp
• OATei27-Bundei26 breakeven spread is now trading at its highest level in a year
• OATei breakevens tend to sell-off most in Aug.
• Risks: next German supply on Sept. 6 announced in Bundei26; OATei27 is trading at the extreme end of its relatively well-behaved range vs BTPei23, a combination likely to benefit from seasonals the most

(Bloomberg) -- Politics show no sign of fading as key market mover while investors consider risks in countries including Turkey, Brazil, South Africa and Mexico; credit rating changes may also feature in August.

• MAIN RISKS

• CEEMEA
  • Turkey is the big focus in CEEMEA as Moody’s rating revision may lead to a downgrade after the failed military coup in July; Fitch is also due to reassess the rating later this month; any downgrade to junk may lead to forced selling; S&P already cut the credit rating to junk on July 20, citing political uncertainty; investors will watch for prospects of an end of state of emergency
  • Political risk is seen on the rise in South Africa which holds local elections during the first week of August; vote may lead to turbulence and violence in country; still, risk sentiment is likely to remain the main driver for rand
  • Expectations for next FOMC meetings to drive CEEMEA currencies trading patterns, while the seasonality in August may lead to short term underperformance

• LATAM
  • Final Rousseff’s impeachment vote is likely in last week of August; mkt sees odds of her return as minimal, which suggests that any change to this view or a surprise result could prompt BRL weakness
  • Oil weakness is back as a key catalyst for Colombian peso; commodity recently breached its 200-DMA for the 1st time since May; a revisit to YTD lows near $30/barrel may severely hurt COP
  • MXN has been sensitive to surveys on Donald Trump’s odds of being elected U.S. president; fresh polls likely to be released in week’s ahead, which may be a hurdle for peso to rise significantly from near its all time low

• ASIA
  • How long PBOC continues to cap USD/CNY around 6.70 will be a key question for investors; Scotiabank sees stability ahead of G-20 Hangzhou Summit on Sept 4-5 and SDR inclusion in October
  • Even with USD/CNY decline in second half of July, daily trading volumes in Shanghai remain around $20b
  • China’s July trade data will be watched following mixed signals from official and Caixin manufacturing PMIs
  • New York Fed’s Dudley says he wouldn’t rule out more tightening this year, which may lend support to USD/SGD as direction is correlated with U.S. rates. Pair is approaching this year’s low at 1.3313, set on June 23

• CALENDAR (based on local dates)
  • Aug. 2: Korea CPI
  • Aug. 3. Thailand central bank meeting; Turkey CPI, South Africa local elections
  • Aug. 5: Malaysia foreign reserves and trade balance; Moody’s to review Turkey rating; Colombia CPI
  • Aug. 7: China foreign reserves
  • Aug. 8: China trade balance; Chile CPI
  • Aug. 9: China CPI, PPI; India central bank meeting; Mexico CPI
  • Aug. 10: Brazil CPI
  • Aug. 12: Colombia minutes
  • Aug.10-25: Singapore 2Q GDP (final)
  • Aug. 11: Malaysia IP; Korea and Philippines central bank meetings; South Africa manufacturing production; Mexico rate decision; Chile rate decision; Peru rate decision
  • Aug. 12: China IP; Malaysia 2Q GDP; India IP and CPI
  • Aug. 15: Russian industrial production
  • Aug. 17: Singapore exports; South Africa retail sales; Russia retail sales
  • Aug. 18: Chile GDP
  • Aug. 19: Indonesia central bank meeting; Fitch to review Turkey rating
  • Aug. 22: Malaysia foreign reserves; Taiwan export orders
  • Aug. 23: Singapore CPI; Turkey and Hungary central bank decisions
  • Aug. 25: Mexico Minutes
  • Aug. 24: South Africa CPI; Brazil bi-Weekly CPI
  • Aug. 26: Taiwan 2Q GDP (final)
  • Aug. 24; Malaysia CPI
  • Aug. 31: Korea IP; Brazil rate decision; Mexico Inflation report; Colombia rate decision

• NOTE: Davison Santana and Mark Cranfield are FX strategists who write for First Word. The observations they make are their own and not intended as investment advice.