LatAm FX Wrap-Up: Risk-On Monday

DXY closes at 101.863. Commodities spectrum sees most metals and agricultural goods gain ground, while energy goods largely retreat. Bets that the Federal Reserve will enact a reduction of the Federal Funds Rate next month strengthen, while news that Israel had agreed to a ceasefire also contributed to today’s risk-on sentiment.

USD/BRL closed lower at 5.4120, after a high of 5.4726 and a low of 5.3794. The pair kicked off the week with sharp upside as the DXY fell and closed below 102. With market participants pricing in a rate cut by the Fed next month, added to lower geopolitical tensions in the Middle East, Usd/Brl’s downside reflected the strong risk-on sentiment characterizing the session. Locally, BCB’s monetary policy director Galipolo stated a Selic rate hike is on the table. On the data front, FIPE CPI – weekly for the period ending on August 15 was reported at 0.18% vs. 0.14% prior. The weekly trade balance for the period ending on August 18 came in at $1.37bln vs. $1.855bln prior. Of note was today’s Focus survey: IPCA was seen at 4.22% for 2024, at 3.91% for 2025, at 3.60% for 2026, and at 3.50% for 2027. GDP was seen at 2.23% for 2024, at 1.89% for 2025, at 2% for 2026 and 2027. The Selic was f/c at 10.50% for this year, at 10% in 2025, and at 9% in 2026 and in 2027. Finally, Usd/Brl was f/c at 5.31 in 2024, at 5.30 in 2025, and at 5.25 in 2026 and in 2027.

USD/MXN closed higher at 18.6749, after a high of 18.8347 and a low of 18.6072. The pair began the week with upside, thus ending a four-session streak of downside. Despite growing speculation the Fed will cut rates in September, Usd/Mxn saw upside as traders and investors remained wary about this week’s Jackson Hole symposium, where Chairman Jerome Powell may issue hints about what the Fed will do next month.

USD/CLP closed lower at 923.50, after a high of 940.07 and a low of 922.58. The pair saw considerable downside thanks to a sharp spike in the price of copper, but also due to the DXY losing ground as markets see a strong likelihood of a rate cut by the Fed in September. The red metal reached $4.21/lb. thanks to more robust demand by China. On the data front, GDP for the second quarter came in at -0.6% q/q vs. -0.6% prior, while the y/y print was 1.6% vs. 1.6% f/c.

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

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