LatAm Brief: USD/EMs broadly softer on FOMC week

29 JUL 11:29GMT: The Dollar has opened firmer on FOMC week, where the board is expected to keep rates unchanged on Jul 31. In Fed Chair Powell's post-meeting presser, he is widely expected to open the doors to a September rate cut, with recent inflation readings (most recently PCE from last Friday) and labour market conditions being supportive to a rate cut. The US 10yr yield has slipped 3bps on Monday to a 12-day low of 4.15%, at writing. That's left USD/EMs largely softer across the board, with USD/MXN fairly steady at the LatAm open on Monday, trading around 18.4530. That's giving the pair a break after an upside run last week that gained ~2.80% after a rally in the Yen deterred carry trades. That being said, with the renewed stability of the Yen this week, and after Brazilian President Lula reinforced his commitment to fiscal responsibility over the weekend, we expect USD/BRL will pare some of those losses seen on Friday, where the pair closed just under 5.6600. Meanwhile, markets will be reacting to the results of Venezuela's elections after Maduro was reelected as the nation's president for six more years. Political tensions have rose in the area after the opposition rejected the result and called on the military to enforces what it was said 'the will of the people'.

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