Owing to the recent dollar move, we revisit the main drivers and forecasts for LatAm FX in H2 2018. We have identified the following five key drivers which are likely to continue to be important in terms of currency performance in the second-half of the year:
We have found that over the past months country-specific factors have taken the driver’s seat in countries such as Brazil and Mexico, reflecting the key role of the presidential election cycle in those countries. Broad USD dynamics have also played a key role in overall LatAm FX performance. For H2, we should continue to see some dominance of politics in LatAm FX, particularly in Brazil and Mexico, given heightened uncertainty regarding the likely policy orientation of new governments. On the flip side, we expect COP to continue outperforming the region owing to the optimism of a likely market-friendly new government, high oil prices and the ongoing economic recovery process.
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Strategist, LatAm FX/rates
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