Today, the November CPI could show the highest inflation rate since 1982, putting further pressure on the Fed to reduce stimulus after Chairman Jerome Powell warned last week that the central bank should consider reducing its bond purchases at a faster pace. Several FOMC participants, including Chairman Powell, have signaled a hawkish shift in their policy stance, catalyzed by growing discomfort with elevated inflation amid robust growth and continued strengthening labor market conditions, which has prompted a shift in expectations among various economists who expect the FOMC to begin raising rates early in 2022. Yesterday's weak 30-year Treasury bond auction showed signs of investor nervousness about today's number. In China, Evergrande Group Chairman Hui Ka Yan was forced to sell pledged shares in the company, according to revelations that came a day after the developer was officially labeled a defaulter for the first time. For its part, China's central bank took additional steps to limit the yuan's strength, setting the benchmark rate weaker than historical estimates and increasing the foreign exchange reserve requirement for banks for the second time this year.
The dollar (DXY) is poised to end the week in positive territory, gaining 0.08% at 96.351 at the start of trading. Risk aversion extends into Friday's European session, as investors continue the cautious sentiment from the previous Asian and American session. Uncertainty over the new Omicron variant, combined with concerns about the implications of faster Fed tapering, is keeping the market on edge. We expect a trading range between 96.1 and 96.6 for the day.
The Colombian peso (COP) advanced 0.2% on Thursday, closing at 3,903 pesos per dollar. The currency is on track for a second week of gains. For the end of 2021 and the first months of 2022, government sales flows, coupled with expectations of the Public Tender Offer (OPA) of GEA companies, could create room for additional appreciation in the exchange rate, although volatility is expected to return as the electoral calendar approaches. The outlook for the Colombian peso is mixed, driven upward by increased demand for dollars following new inflation expectations, compared to appreciations in oil prices. In this context, we expect a daily trading range between 3,890 and 3,930 pesos per dollar.
The Mexican peso (MXN) began the day with a marginal depreciation of 0.06%, trading at around 20.9733 Mexican pesos per dollar. The currency is responding to the cautious market sentiment ahead of the release of US inflation data, which is key to further shaping expectations regarding the Fed's forward guidance. Meanwhile, the latest local data has indicated a slowdown in economic activity, with industrial production now growing at a slower pace than previously forecast by the Bloomberg consensus. Thus, we anticipate a narrow daily trading range between 20.818 and 21.12.
The Chilean peso (CLP) opened the day depreciating 0.32%, trading at 850.76 Chilean pesos per dollar. This was due to increased uncertainty in the region, anticipating negative economic data from the United States, accompanied by a slight increase in the DXY index and a rebound in copper futures prices, somewhat reducing the losses of previous days. In this context, we expect a narrow daily trading range between 859.90 and 839.40.
The Peruvian sol (PEN) closed Thursday trading with a marginal depreciation of 0.04%, equivalent to a price of over 4.0800 soles per dollar. The pair's upward trend occurred amid a strengthening of the DXY as investors focused their attention on possible Fed measures pending the release of inflation data. Locally, Congress did not admit the motion to impeach President Pedro Castillo, thus slightly reducing political uncertainty in the country. We expect a narrow daily trading range between 4.023 and 4.128.
The Chinese yuan (CNH) opened trading weaker, trading at 6.3767 yuan per dollar, with the USD/CNH rising 0.01%, amid currency speculation as China's central bank forced banks to hold more foreign currency in reserve and set a weaker-than-expected daily reference rate to counter strong yuan appreciation. In this context, we expect a narrow daily trading range of 6.3850–6.3640.
The euro (EUR) opens the day with a 0.17% drop to US$1.1273 per euro. The European currency began the day losing ground against the dollar, extending its decline to 1.1265 during the European session thanks to the dollar's strength on all fronts. Risk aversion continues in the markets as measures to contain its spread are tightened. Meanwhile, the key data of the day is inflation in the United States, which is expected to rise 0.7% month-on-month and 6.7% year-on-year. In addition, European Central Bank President Christine Lagarde spoke earlier in the European session. In this context, we expect a narrow daily trading range between 1.132 and 1.124.
The pound sterling (GBP) fell 0.12% to 1.3205 per dollar. The pair started the day lower after the latest British economic data showed a slowdown in growth, even before the emergence of the new coronavirus variant. This ultimately generated uncertainty among investors about expectations of a rate hike by the Bank of England and ultimately pressured the British currency's price. In this context, we expect a narrow daily trading range between 1.326 and 1.315 per dollar.
The Japanese yen (JPY) opened the session depreciating, with the USD/JPY rising 0.26% to around ¥113.73, awaiting the latest inflation figures for November in the United States. This will be a key factor to monitor ahead of the Federal Reserve meeting and its decision on the course of monetary policy. Furthermore, bond movements anticipate possible appreciations in the dollar's strength, causing the yen's price to rise. In this context, we expect a narrow daily trading range between 114.10 and 113.35.
The Swiss franc (CHF) opens the day with a 0.11% gain, trading at 0.9243 francs per dollar. The European currency begins the day with further gains as fears about the Omicron-related shutdowns increase and strengthen market aversion. Meanwhile, investors are cautious in light of the US inflation data. In this context, we expect a narrow daily trading range between 0.928 and 0.92.
The Canadian dollar (CAD) is opening the day with a 0.11% appreciation, equivalent to a quote of over 1.2700 Canadian dollars per American dollar. The currency's performance comes as stock futures rise in anticipation of US inflation data, which, if higher than expected, would increase pressure on the Fed's tapering. Locally, we are awaiting the release of third-quarter capacity utilization data. As oil prices recover, we anticipate a tight daily trading range between 1.264 and 1.276.
The Australian dollar (AUD) appreciated 0.03%, reaching 0.7150. The pair is struggling to consolidate its positive trend and recover from the losses suffered in previous sessions. However, stronger demand for the dollar and the lack of significant catalysts are keeping the currency under pressure. Given this context, we expect a narrow daily trading range between 0.72 and 0.711.
The New Zealand dollar (NZD) opened the day with a 0.25% drop, trading at 0.6777. The pair began the session in negative territory and consolidated a downward trend at the end of the week. The contraction in the currency's price is mainly explained by a more cautious risk sentiment, which has ultimately strengthened the dollar and affected the currency's dynamics. In this context, we expect a narrow daily trading range between 0.682 and 0.674.
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
Laura Daniela Triana Pulido Equity Analyst daniela.triana@accivalores.com
Daniel Herrera Hernandez Fixed Income Analyst daniel.herrera@accivalores.com
Juan Pablo Bejarano Holding Sector Analyst juan.bejarano@accivalores.com
Andres Felipe Campos, Retail Sector Analyst andres.campos@accivalores.com
Daniel Felipe Pardo Energy Sector Analyst daniel.pardo@accivalores.com
Juan Felipe Herrera, Financial Sector Analyst juan.herrera@accivalores.com
Back to blog
