EM LATAM CREDIT: MNI EM Credit Market Wrap - LATAM (03 Apr)

• More timely PMIs showed improved manufacturing sentiment but a moderation in services, which could threaten the ECB’s current forecast for real GDP growth to 0.3% Q/Q in 1Q25. Germany and France continue to lag.
• Specifically, the final Eurozone manufacturing PMI saw a 0.3pp upward revision to 47.6 in February to extend its modest climb from 46.6 in January. It’s the highest in two years but has been in contractionary sub-50 territory since June 2022.
• From the report "Factory production came close to stabilising, with reductions in new orders – both total and from abroad - at their softest in nearly three years". Notably, "Eurozone factories continued to cut their workforces, however. The rate of job shedding even accelerated, reaching its most substantial in four-and-a-half years".
• Final service PMIs for February are published tomorrow (Mar 5) but the flash saw service activity weaker than expected at 50.7 after 51.3 in January. 

• The advance and preliminary Q4 GDP releases in the intermeeting period saw real GDP growth initially miss already weak analyst forecasts of 0.1% Q/Q with 0.0% before being revised back to that 0.1% (0.05% unrounded).
• Regardless, it was a sharp pullback from a solid 0.4% in Q3 and underwhelmed relative to the 0.2% the ECB forecast in its December projection round.
• It was the softest sequential quarter of 2024 whilst the Y/Y rate levelled out at 0.9% Y/Y as its acceleration from 0.0% Y/Y back in 3Q23 stalled. The final Q4 release lands the day after the ECB decision.
• Real productivity per employee meanwhile fell 0.1% Q/Q in Q4 after three consecutive positive readings. It meant productivity rose 0.2% Y/Y after 0.0% in Q3 for the highest since Dec 2022, but this was still below the ECB's December MPR projection of 0.5%.
• A cyclical recovery in productivity growth is key to the ECB's projection for a rebound in economic activity. Although the declining trend in productivity growth appears to have been arrested over the past few quarters, evidence of an upswing is still lacking.

• RES 4: 1.4793 High Feb 3 and key resistance
• RES 3: 1.4700 Round number resistance 
• RES 2: 1.4641 76.4% retracement of the Feb 3 - 14 bear leg 
• RES 1: 1.4548 61.8% retracement of the Feb 3 - 14 bear leg
• PRICE: 1.4513 @ 16:33 GMT Mar 4 
• SUP 1: 1.4370/4296 Low Mar 3 / 50-day EMA  
• SUP 2: 1.4151/4107 Low Feb 14 / 50.0% of Sep 25 - Feb 3 bull run
• SUP 3: 1.4011 Low Dec 5 ‘24
• SUP 4: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle

The USDCAD correction / bull cycle that started Feb 14 remains in play for now and the pair is holding on to its recent gains. Monday’s gains reinforce current conditions and sights are on a climb towards 1.4548, a Fibonacci retracement point. The short-term bear trigger has been defined at 1.4151, the Feb 14 low. Initial firm support to watch lies at 1.4296, the 50-day EMA. A break of this average would highlight an early reversal signal.