LATAM FX: Brazilian Real Consolidating Most Recent Advance
Feb-13 15:56
- Despite congress coming back from recess in February, noise related to the political sphere has remained limited in the past couple of weeks, allowing the Brazilian real to consolidate its substantial recovery seen in 2025.
- This has translated into USDBRL trading within a relatively tight range, broadly respecting the 5.75-5.80 parameters. Overall, a bear cycle remains in play and this signals scope for a deeper retracement lower. Sights remain on 5.7231, the Nov 13 low, and 5.6340, the Nov 7 low. Initial resistance does not come in until 5.9163, the 50-day EMA.
- SocGen note the economic and fiscal realities have hardly changed in recent months, and they believe fiscal concerns should continue to weigh on investor sentiment, potentially impacting BRL assets sooner or later. Pointing to the BCB’s Focus survey, SocGen highlight that the consensus does not envision fiscal balances improving anytime soon or that public debt will stabilise at an acceptable level in the near future. They think this increases the likelihood of the Copom maintaining a hawkish stance for an extended period.
- Following today’s poor set of retail sales data for December, attention will turn to next week’s economic activity data, as well as the usual release of the central bank’s Focus survey.
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FOREX: EURGBP Matches Touted Resistance at 0.8448, Bull Cycle in Play
Jan-14 15:41
- The tightening of German-UK spreads has underpinned EURGBP outperformance on Tuesday, with the cross still up around half a percent on the session. The latest pop higher prompted EURGBP to match the touted resistance level of 0.8448 in recent trade, the Oct 31 high and a key reversal trigger point.
- The cross has edged ~15 pips lower following the technical hold, which potentially boosts its significance ahead of tomorrow’s inflation data release, particularly given the underlying bull cycle that is now in play.
- As noted, a breach would signal scope for a move towards 0.8494, the August 26 high. Separately, the August highs reside at 0.8625, which could garner attention should UK fiscal concerns/uncertainty deteriorate further. Both the 20-day and 50-day EMA’s represent initial support for the cross, currently intersecting around 0.8325.
STIR: Morning SOFR Option Update: Better Put Volume
Jan-14 15:36
Better SOFR put structure buying since the open, fading this morning's post-PPI rally with underlying futures scaling off of this morning's knee-jerk rally. Projected rate cuts through mid-2025 continue to retreat, current vs. late Friday levels* as follows: Jan'25 steady at -0.7bp, Mar'25 at -5.8bp (-4.9bp), May'25 -10.2bp (-9bp), Jun'25 -17.6bp (-16.5bp), Jul'25 at -20.4bp (-18.7bp).
- +3,000 SFRM5 95.81/95.93/96.18 2x3x1 call flys 3.0 ref 95.835
- +15,000 0QK5 94.75/95.00 put spds, 2.0 vs. 95.905/0.05%
- +10,000 SFRU5 95.50/95.75/96.00 put flys, 6.5
- +15,000 SFRZ5 95.37/95.62/95.87 put flys, 5.5-5.75 ref 95.895
- +5,000 SFRM5 95.87/96.31 call spds 8.0 ref 95.835
- +4,000 SFRG5 95.62/95.68/95.75 put flys 3.0 ref 95.74
- +5,000 SFRZ5 95.37/95.62/95.87 put flys 5.5 ref 95.875
SONIA: Latest Large SONIA Options
Jan-14 15:31
- SFIM5 95.75/96.00cs, bought for 6.75 in 24k.
- SFIM5 95.70/96.00cs, bought for 8.75 and 9 in 20.5k.
