NY stock futures are advancing alongside their European counterparts, reversing a sell-off from earlier trading, as optimism about earnings offsets concerns about rising bond yields. The rise in 10-year Treasury yields to 1.90%, a level not seen since December 2019, suggests they will easily surpass 2%. Speculation is growing that the Fed could raise interest rates by more than a quarter of a percentage point in March to combat inflation, while the Bank of England (BoE) could act again next month after Britain's inflation rate unexpectedly hit its highest level since 1992 and Germany's 10-year yield turned positive for the first time since 2019. In China, where policy differs from that of the US, the central bank has promised to use more monetary policy tools to help the economy and ease credit stress amid a housing crisis.
The dollar (DXY) is little changed, losing -0.13%, reversing early-week gains and trading above 95.606 points. Safe-haven flows continue to dominate financial markets early Wednesday amid escalating tensions between Russia and Ukraine, inflation fears, and the rising number of coronavirus cases in Asia. Declines in stock markets and rising Treasury yields also allowed the dollar to strengthen. In this context, we forecast a narrow daily trading range between 95.3 and 95.9.
The Colombian peso (COP) depreciated 0,8% on Tuesday, closing at $4.037,19 per dollar. The Colombian economy's sustained 9.6% YoY growth throughout November confirms our expectations for 10.02% growth throughout 2021. As commodity prices continue to soar and we see a recovery in the region's currencies, amid the optimism with which global stock markets are starting, we expect a trading range between $4000 and $4050 for the day.
The Mexican peso (MXN) began the day with a 0.27% depreciation, allowing the currency to trade above 20.3571 pesos per dollar. The currency is responding to the strengthening of the index that measures the strength of the dollar as a result of rising interest rates on fixed-income securities in developed economies amid persistent inflationary pressures. Locally, investors are awaiting the release of the country's international reserves as of Friday of last week. As risk aversion increases, we forecast a narrow daily trading range between 20.276 and 20.443.
The Chilean peso (CLP) opened the day appreciating 0.19%, trading at 815.55 Chilean pesos per dollar, mainly due to the sharp drop in the dollar on the local market last Tuesday, falling to its lowest level in almost two months and coming very close to falling below $815, reflecting the strength the Chilean peso has been showing as doubts regarding the President-elect's new presidential cabinet dissipate. In this context, we expect a narrow daily trading range between 823.527 and 808.473.
The Peruvian sol (PEN) closed Monday with a 0.42% appreciation, equivalent to a price of over 3.854 soles per US dollar. The currency continues its 2022 rally thanks to the reduction in political uncertainty within the country, considering that Pedro Castillo stated that the currency's recovery reflects growing business confidence in the government. Meanwhile, the National Institute of Statistics and Informatics (INEI) reported last Saturday, January 15, that national production increased by 2021% during November 3,47. We thus forecast a limited daily trading range between 3.807 and 3.878 soles.
The Chinese Yuan (CNH) opened the session higher, trading at 6.3506 yuan per US dollar, with the USD/CNH down -0.12%, following the new stance of the People's Bank of China which announced that it will introduce more policies to ensure stability until the current downward economic pressures are fundamentally alleviated, in addition, China's macro leverage ratio fell to 272.5% last year, down from 280.2% year-over-year, while declining for five consecutive quarters, creating room for maneuver for future policy changes. Against this backdrop, we expect a narrow daily trading range between 6.364 and 6.347.
The euro (EUR) opens the day with a 0.14% gain at a trading price of US$1,1341 per euro. The European currency begins the day gaining ground against the dollar, as the weakness in the USD is helping the pair recover. German CPI data was released, rising 0.5% in December, and it was also reported that German Bund yields returned to positive territory for the first time since May 2019. The European currency is seeing some light after posting three consecutive daily declines that took it to Tuesday's weekly low of 1,1315. The dollar's momentum has also been key in determining the euro's value, with high US yields remaining at record highs. In this context, we expect a narrow daily trading range between 1.139 and 1.13.
The British pound (GBP) opened the day with a 0.31% appreciation to $1.3636, breaking a four-day losing streak. The pair opened the session higher, driven by a shift in sentiment toward the pound, following the announcement of UK annualized inflation, which stood at 4%, higher than expected for December. Higher inflation in the UK increases the likelihood of a rate hike by the Bank of England (BoE) at its first meeting of the year on February 5.4. Meanwhile, a recovery in risk sentiment weakens the US dollar, which is considered a safe haven, and contributes to the GBP's rally. In this context, we expect a narrow daily trading range between 3 and 1.369.
The Japanese Yen (JPY) opens the session higher, with USD/JPY down -0.10% to trade around ¥114.52, following news that fossil fuels account for around 85% of Japan’s energy consumption, trade loss terms and the US 2% yield, while leading the battle against deflation, it could be said that Japan could benefit from some imported inflation and the Bank of Japan’s recent shift to a balanced view on inflation risks still leaves it several years to adjust. In this context, we expect a daily trading range between 114.896 – 114.062.
The Chinese Yuan (CNH) opens the session higher, trading at 6.3506 yuan per US dollar, with the USD/CNH down -0.12%, following the new stance of the People's Bank of China which announced that it will introduce more policies to ensure stability until the current downward economic pressures are fundamentally alleviated, in addition, China's macro leverage ratio fell to 272.5% last year, down from 280.2% year on year, while declining for five consecutive quarters, creating room for further policy changes. Against this backdrop, we expect a narrow daily trading range between 6.364 and 6.347
The Canadian dollar (CAD) is opening the day with a 0.14% appreciation, equivalent to a quote of over 1.2498 Canadian dollars per American dollar. The currency is supported by a strengthening of its terms of trade, taking into account a robust strengthening of oil prices, while the money market expects a rate hike from the BoC at its meeting next week, thus strengthening the currency's carry. We therefore anticipate a narrow daily trading range between 1.244 and 1.256.
The Australian dollar (AUD) opens the day with a 0.41% gain, reaching 0.7211, breaking above the 0.7200 level. The pair started the day in positive territory, moving higher as the level of Treasury yields dominated broader market sentiment. However, a critical factor is that investors are turning their attention to the Australian labor market report, which will be released on Thursday. The country's unemployment rate is expected to fall slightly to 4.5% in December from 4.6% previously, and at least 30,000 jobs are expected to be created. Thursday's labor market data will be another opportunity to reassess whether the market's optimistic view of the RBA is possible. Against this backdrop, we expect a narrow daily trading range between 0.726 and 0.717.
The New Zealand dollar (NZD) opened the day with a 0.32% gain to trade at 0.6792. The pair opened the session higher, supported by improved performance in global indices. A recovery in risk sentiment and US bond yields weakened the US dollar, which is considered a safe haven. This strengthened demand for the NZD and will create some significant trading opportunities around the NZD/USD pair. In this context, we expect a tight daily trading range between 0.684 and 0.676.
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
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