LatAm Brief: Brazil's Fiscal Deficit could fall below 0.5%/GDP

02 AUG 11:38GMT: The DXY found support at the 101.600 handle while the US markets remain closed for Labour Day. Recapping from Fri's data; PCE Price Index met the f/c and rose to 2.5% y/y in Jul, while m/m data shows a 0.2% rise from 0.1% prior. Core PCE Price Index came in lower than expected (2.7% y/y) and steadied at 2.6% y/y. On the political front, Presidential candidate Harris has erased most of Trump's lead among likely voters in Michigan with a 45% support compared with his 46% according to an EPIC MRA poll. Elsewhere, which may take a toll on EM sentiment is over the weekend, Chinese official PMI report for August came out over the weekend showing the manufacturing sector contracting at a slightly faster pace than expected, a fourth consecutive month of contraction recorded so far, the latest sign that China may be struggling to achieve its '24 growth target of around 5%. USD/LatAms may be mixed at the LatAm open on Monday. USD/MXN fell to an early session low of 19.6367 trimming its weekly losses. USD/CLP may be softer at the open ahead of Chile's Economic Activity data (12:30GMT), which is expected to rise in July to 2.7% y/y from 0.1% prior. Elsewhere, S&P Ratings expressed that the proposed changes to a pricing mechanism for small electricity generators which are mainly solar, by the Chilean govt to offset the sharp rise in the country's electricity rates could hurt their credit worthiness (via Bbg). USD/BRL may be firmer at the open after reports show that Brazil's Pres Lula is set to release a budget plan for next year which may displease both financial markets and leftist political allies, while Minister Tebet expressed that the govt expects to make a "true spending review" in the second half of next year with a focus on achieving its 2026 fiscal target. In addition to the fiscal talk, FinMin Haddad voiced that the federal budget may end the yr with a deficit of less than 0.5%/GDP, "with a chance of staying within the band of tolerance." BCB's Neto spoke on Fri and mentioned that a possible cycle of monetary tightening would be gradual, trying to temper investor bets of large rate hikes. The governor also express that they intervened in the market due to a rebalancing of an index but will do more interventions if need be. Elsewhere, Brazil economist continue to raise their yr end CPI f/c, but also raised their GDP f/c. Still to come in LatAm is Brazil's Mauf PMI (13GMT) & Mexico's Survey, Remittances (15GMT) & Manuf indexes (18GMT).

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