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Main ING Latam FX forecasts
| USD/BRL | USD/MXN | USD/CLP | ||||
| 1M | 5.35 | ↑ | 20.5 | ↑ | 950.00 | → |
| 2M | 5.50 | ↑ | 20.5 | ↑ | 950.00 | → |
| 6M | 5.75 | ↑ | 20.0 | ↓ | 925.00 | → |
| 12M | 5.90 | ↑ | 20.0 | ↓ | 900.00 | → |
USD/BRL: Brazilian assets rally on first round results
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/BRL
5.1999
|
Bullish | 5.35 | 5.50 | 5.75 | 5.90 |
- Brazilian assets enjoyed strong gains on the 1st round election results. Incumbent Bolsonaro did better than expected at 43%, while challenger Lula received 48% support. The run-off is held October 30th. The better than expected showing of the right in the elections – and particularly the strong showing of the right in Congress – means that either Lula will be dragged to the centre or Bolsonaro can continue his free-market policies.
- There is still the risk, however, of a narrow Lula win Oct. 30th and contested election results – a big BRL negative.
- A tough external environment, both from higher US rates and lower China/US growths keeps us bearish on the BRL.
USD/MXN: Banxico dances toe-to-toe with the Fed
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/MXN
19.98
|
Mildly Bullish | 20.50 | 20.50 | 20.00 | 20.00 |
- Though it is not official policy, Banxico is doing an exceptionally good job of keeping USD/MXN stable near 20.00. It does this by matching the Fed hike-for-hike. The policy rate is now 9.25% in Mexico and is expected to be hiked another 125bp over the next six months – matching Fed expectations.
- Arguably the MXN should perform better than many in EM given its exposure to the strong US economy and relatively low debt to GDP ratio (near 50%) as AMLO espoused new debt during 20/21.
- However, Mexico is a big beast in EM indices. A tough time for EM as the Fed raises rates into a recession could easily see MXN come under pressure over the next 3-6 months.
USD/CLP: In the thick of it
|
Spot
|
One month bias | 1M | 3M | 6M | 12M |
|---|---|---|---|---|---|
|
USD/CLP
983.33
|
Neutral | 950.00 | 950.00 | 925.00 | 900.00 |
- Chile’s peso remains in the thick of financial market pressure as ill-winds blow from the international environment. Chile’s large current account deficit leaves the peso vulnerable and investors can see central bank FX reserves having dropped 25% from late last year as it tries to support the peso. Tapping the IMF’s $18bn Flexible Credit Line (FCL) to support the CLP would be a new low point – FCL’s are precautionary & never meant to be used.
- In response the central bank is hiking aggressively, with the policy rate now 10.75%. It may have to hike more.
- Weak China and US growth over the next six months and our call for ongoing dollar strength, suggests $/CLP retests 1000.
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15 October 2021
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This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
↑ / → / ↓ indicates our forecast for the currency pair is above/in line with/below the corresponding market forward or NDF outright
Source - all charts and tables: Refinitiv, ING forecast