LATAM: JP Morgan Says Path For Eventual Venezuela Debt Restructuring Elusive
Feb-28 10:32
- President Trump's announcement this week that the US is reversing the oil-related concessions made to Venezuela under the previous administration suggests a sharp pivot from recent policy actions. JP Morgan expects the closure of Chevron’s operation in Venezuela to materially affect the country’s economy, undermining economic activity, while putting significant pressure on inflation and the FX.
- While President Trump has been nimble in adjusting deadlines related to tariff discussions, JPM takes his statement to revoke Chevron’s oil license to operate in Venezuela from March 1 at face value. The lack of electoral conditions and a slower deportation pace than agreed with Maduro’s regime were cited as the grounds for this decision.
- This will have a significant macro impact, given Chevron’s relative importance for Venezuela’s overall oil production (230 kb/d) and current FX regime, where it stands as the main inflow.
- JPM is of the opinion that the repricing across the curve is fair if tensions don’t escalate, with renewed upside probably contingent on any revival of the policy stance. While the fluid nature of this administration’s foreign policy could certainly allow for a shift in stance at some point, JPM expects the renewed US hawkishness to be sustained over the medium term.
- In this sense, the path for a bilateral normalisation, which in their view is necessary for an eventual debt restructuring, now looks much less tangible than it recently appeared to be.
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RIKSBANK: Thedeen Continues With Cautious Press Conference Tone
Jan-29 10:27
Thedeen continues to strike a relatively cautious tone at the Riksbank press conference.
- He has repeatedly stressed the uncertainty of the December rate path, and in doing so did not provide a view on whether the path has upside or downside risks.
- He notes that more information will be available in March, when the next projection will be put forward.
- This caution may be factoring into SEK strength against the EUR over the last 15/20 minutes, but as noted above, the single currency remains under pressure more broadly against the G10.
- Initial support in EURSEK is the Jan 22 low at 11.4389.
UK: Chancellor-'Productive Capacity Of UK Has Become Far Too Weak'
Jan-29 10:26
Delivering a speech on growth, Chancellor of the Exchequer Rachel Reeves says "Productive capacity of the UK has become far too weak." Reeves: "The solution is government systematically removing barriers...The strategy that I have consistently set out is to drive the supply side of the economy."
- Reeves says her growth strategy has three prongs: Stability, Reform and investment
- Reeves acknowledges her increase in National Insurance on business has consequences on business and beyond- 'I accept there are costs to responsibly. But the costs of irresponsibility are far higher. Those who opposed my Budget know that too'
- On trade and international relations
- Reeves: "We will work with the US to deepen our economic relationship in the months and years ahead."
- Reeves: "We will prioritise proposals with the EU that are consistent with our manifesto."
- Reeves: "The business and trade minister will travel to India to restart talks on a new trade deal.
- Reeves: "We will protect the important role of pensions in the gilt market while giving additional flexibility." Says that after talking with regulators, an action plan will be published in March that seeks to aid being more agile to help businesses.
EUR: Extending broader lows
Jan-29 10:26
- The EUR extends lower, although the Currency has mostly seen a two way tight price action, it is now testing intraday lows versus the USD, CAD, CHF, CNH and the SEK.
- The Yen is the best performer in G10, now up 0.38%, and EURJPY targets the Monday's low at 161.55.
