A stabilization in U.S. bond yields helped this move, with the 10-year Treasury yield returning to above 1,30% following the Fed's supportive outlook despite recent inflation performance.
Investors focused their attention on corporate earnings, with optimism about resurgent consumer demand tempered by the spread of the Delta variant of the coronavirus. The Fed's recent stance underscores a growing divergence among global central banks over their response to rising price pressures, as banks from New Zealand to Canada and the United Kingdom are turning hawkish. The New Zealand dollar advanced after the nation's inflation rate breached the central bank's target range, reinforcing bets on an interest rate hike. In Japan, the central bank kept its main monetary policy settings unchanged.
Dollar
The dollar (USD) opened the session higher, with a 0.09% increase to a DXY index quote of 92.71, amid global concerns about the rise in coronavirus infections and after the release of the US retail sales figure, which came in well above market expectations. Meanwhile, 10-year Treasury bond yields regained their positive tone and again surpassed the 1.30% level. In this regard, we expect a trading range of 92.30–92.70 for the day.
Colombian peso
The Colombian peso (COP) closed Thursday trading at $3,816.02 per dollar, reflecting a 11.51% year-to-date depreciation and a 1.76% drop in July, representing the weakest performance against its Latin American counterparts. Considering the rebound in U.S. retail sales released earlier in the day, the strength of the dollar index, and rising Treasury yields, we expect the Colombian peso to experience upward pressure and remain within a trading range of $3,790–$3,830 per dollar for the day. It will likely end up depreciating for the second consecutive day of the week, but on track for its second weekly appreciation of July.
Mexican peso
The Mexican peso (MXN) is appreciating 0.35% from its previous closing value, allowing the currency to trade at around 19.8660 pesos per dollar, as the country's markets recorded their best day in more than three months while all its peers joined in a sell-off. However, the rise in COVID-19 cases continues to rise. Amid this context, trading is expected to range between 19.8570 and 20.0114 Mexican pesos per dollar.
Chilean peso
The Chilean peso (CLP) opened the day with an increase in value, trading at 755.70 Chilean pesos per dollar, with the USD/CLP falling 0.11%. This is its highest price in seven months, due to uncertainty surrounding next Sunday's elections and key U.S. data. Copper prices remained stable. Amid this context, trading is expected to range between 755.02 and 756.95 Chilean pesos per dollar.
Peruvian Sun
The Peruvian sol (PEN) appreciated 0.13% to 3.9483 soles per dollar, as the economy showed continued growth, increasing 47.8% year-on-year in May, its third monthly advance following a series of contractions during a new wave of the coronavirus. However, concerns about the country's political future remain, generating a sense of uncertainty. Amid this context, we expect a trading range between 3.9461 and 3.9671 soles per dollar.
Chinese Yuan
The Chinese Yuan (CNH) opens the session losing ground, trading at a value of 6.748 yuan per dollar, with the USD/CNH increasing 0.25%, followed by a cut in China's GDP growth for 2021 to 8.5% from 9%, due to a weaker recovery in consumption, this being a constant in the region and also awaiting the behavior of sales in the United States. In the midst of this context, negotiations are expected to vary between 6.4790 – 6.4680 yuan per dollar.
Euro
The euro (EUR) is opening the day with a 0.08% decline to US$1.1808, following the release of US retail sales figures and ahead of next week's European Central Bank policy meeting, where a shift in policy language is expected, given the establishment of a 2% symmetric target. We therefore expect a trading range of US$1.1790–1.1830 for the session.
libra Esterlina
The British pound (GBP) is losing ground against the dollar, falling 0.16% to US$1.3808, after concerns about inflation and the speed of infections in the United Kingdom weighed on the British currency's performance. July 19 remains Freedom Day, marking the full reopening of the economy, but it poses a huge risk due to the Delta variant. Thus, we expect a narrow daily trading range between US$1.3790 and 1.3830.
Japanese Yen
The Japanese Yen (JPY) opened the session lower, with USD/JPY rising 0.29% to trade around 110.17 yen, followed by two announcements from the Boj. The first announcement mentioned that it will keep its benchmark policy rate stable at -10 basis points and also the continued purchase of J-Reits of up to 180,000 billion yen, however, the second item mentioned that it has lowered its fiscal year growth forecast to 3.8% from the previously projected 4%. We expect trading to range between 110.50 and 109.85 yen per dollar.
Swiss franc
The Swiss franc (CHF) is consolidating a slightly positive trend, rising 0.21% to 0.9195, after gaining traction for the second consecutive day. Market sentiment, which is beginning to stabilize, is weighing on the CHF, considered a safe-haven asset, and is benefiting the pair. Additionally, a modest increase in demand for the USD is also supporting the currency. In this context, trading between 0.9181 and 09220 is expected.
Canadian dollar
The Canadian dollar (CAD) is depreciating slightly, with the USD/CAD pair fluctuating between gains and losses, currently trading around the 1.2593 level. The pair has been influenced by several factors, including a rebound in oil prices that has limited gains, and subdued demand for the USD ahead of the US retail sales data. Against this backdrop, trading between 1.2549 and 1.2613 is anticipated.
Australian dollar
The Australian dollar (AUD) opened the session depreciating 0,11%, reaching 0,7419. Broader dollar strength has caused the pair to extend its decline. With the economic data released this week from the United States, the USD has become a safe haven for investors, depreciating the Australian currency. Additionally, a five-day lockdown in the Australian state of Victoria continues to raise investor concerns about contagion in the country. A daily trading range of 5 to 0,7415 is expected.
New Zealand Dollar
The New Zealand dollar (NZD) is consolidating its positive trend, appreciating 0,40% to 0,7009. With growth in the industrial sector due to an increase in the New Zealand manufacturing PMI, the pair has consolidated gains. Additionally, the CPI data, which exceeded expectations, has given the currency an upward movement. However, with concerns about the Delta variant, gains could be limited. In this context, daily trading is expected between 0,6969 and 0,7029.
Global Disclaimer
We are convinced that every investor should diversify their investments across a variety of asset classes, regardless of market environment or trend, and work closely with their financial advisor to ensure their portfolio is adequately diversified and that their financial plan supports their long-term goals, time horizon, and risk tolerance. However, diversification does not guarantee profit or protect against loss. The preceding information, as well as the individual companies and/or securities mentioned, should not be construed as investment advice, a recommendation to buy or sell, or an indication of an intention to trade on behalf of any Acciones & Valores SA product. The securities mentioned may or may not be part of Acciones & Valores SA funds. For a complete list of Acciones & Valores SA portfolio holdings, please refer to the most recent annual, semi-annual, or quarterly report on our website. This document is for informational purposes only. Acciones y Valores is not responsible for the interpretation of such information, given that it does not cover all the aspects that an investor might consider necessary or desirable to analyze their decision to participate in a transaction, given that it is presented in an abbreviated form. For complete and absolute accuracy, investors must consult all documents provided through the website. Likewise, investors must conduct their own financial and legal analysis before making any investment decision. The values and figures contained herein are obtained from market sources presumed to be reliable, such as Bloomberg, Reuters, and the Issuers. The ratings contained in this report should not be considered investment recommendations or substitutes for ratings issued by certified credit agencies such as Moody's or Standard & Poor's. These ratings are solely quantitative; they do not include qualitative factors and depend on the financial information available in the market at the time of preparation. The opinions, estimates, and projections in this report reflect the author's current judgment as of the date of the report, and it is clarified that the content of the information contained herein is subject to change without notice. The authors' compensation is not associated with the results of the report or the recommendations made. The presentation and any preliminary documents regarding the products mentioned herein do not constitute a binding public offer; therefore, both the presentation and any other documents are subject to supplement or correct.
Héctor Wilson Tovar García Macroeconomic Analysis
Research Manager wtovar@accivalores.com
Lina María Uribe, Foreign Exchange Analyst lina.uribe@accivalores.com
Laura López Merchán Equity Analyst laura.lopez@accivalores.com
Daniel Herrera Hernández Fixed Income Analyst daniel.herrera@accivalores.com
Ángeles Sánchez, Retail Sector Analyst maria.sanchez@accivalores.com
Nicolás Caicedo, Energy Sector Analyst nicolas.caicedo@accivalores.com
Daniela Sarta Financial Sector Analyst maria.sarta@accivalores.com
