LatAm Brief: Brazil's IPCA inflation in focus

10 SEPT 11:44GMT: The DXY is softer and cooled to a session low of 101.548 as US Small Business optimism fell to 91.2 in Aug from 93.7 prior (f/c 93.6), declining by the most in two years as earnings tumbled and firms grew more downbeat about the prospect of sales and the economy. Near-term policy expectations, or more the lack of clarity between 25bp or 50bp leaves the market in a state of flux. Oct24 Fed Funds moved back above 5% yesterday, reducing the implied probability of a half point cut. The 'dot plot' also looms into view as to how many cuts will be suggested by year end. The Fed Funds curve continues to price for over 100bp of easing. USD/LatAms may be softer at the LatAm open on Tuesday. USD/BRL may be softer at the open ahead of Brazil's CPI data, IPCA is expected to ease to 4.26% y/y in August from 4.50% y/y prior, possibly offering policymakers some relief ahead of a difficult rate decision in September. A combination of falling food prices, transportation costs and a downtick in fuel prices should aid in seeing inflation fall, while risks of seasonality rises in education and apparel costs could slow progress (preview here). Elsewhere, BCB economist continue to raise their yr-end inflation and GDP f/c. USD/MXN has fallen to a session low of 19.8767 after Mexican inflation eased more than anticipated in August to 4.99% y/y vs the 5.06% consensus forecast and 5.57% in July. The m/m print eased to 0.01% vs the 0.07% estimate and from 1.05% prior. Core CPI eased s expected to 4% y/y from 4.05% prior, with the m/m print easing a touch more than expected to 0.22% vs the 0.23% estimate and 0.32% in July (insight here). USD/CLP may also be softer at the open as Chile's FinMin Marcel expressed that the govt will be moving forward with their plan to halve the fiscal deficit, even as it faces spending pressures to fight crime and fund social programs, indicating that the govt will maintain a tight rein on fiscal expenditures in 2025. Also, Chilean economist see 2024 and 2026 GDP higher from prior levels, while expected the yr end rate to fall to 5% (via Bbg).

---- Subscribe to read more ----

To receive this analysis plus much more, subscribe to IGM. Request your free trial of the service today.