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Mexican Peso's Near-Term Strength To Give Way To Longer-Term Depreciation Published: 17 December 2020

  • The Mexican peso (MXN) will appreciate against the US dollar over the near term, driven by optimism around the global economy and its carry trade value.
  • Over the longer term, the agency expects the currency will weaken against the US dollar, weighed down by relatively weak economic fundamentals and more dovish monetary policy.
  • Fitch Solutions forecasts an average exchange rate of MXN20.70/USD in 2021, down from previous forecast of MXN21.65/USD, with the exchange rate ending the year at MXN21.30/USD.

(Source: Fitch Solutions)

Modest Inflation, Dovish US Fed Will Enable Low Interest Rates In Costa Rica In 2021 Published: 17 December 2020

  • The Banco Central de Costa Rica (BCCR) will maintain a dovish monetary policy stance in 2021, aided by low domestic inflation and sustained global central bank dovishness.
  • In addition, the government’s limited fiscal capacity will leave monetary policy as the primary driver for Costa Rica’s economic recovery in the coming quarters.
  • Fitch Solutions forecasts the BCCR will hold its benchmark interest rate at 0.75% through end-2021, and expect inflation will average 1.8% y-o-y in 2021.

(Source: Fitch Solutions)

Oil Prices Hit Nine-Month High After U.S. Crude Stock Draw Published: 17 December 2020

  • Oil hit a nine-month high on Thursday after government data showed a fall in U.S. crude stockpiles last week, while progress towards a U.S. fiscal stimulus deal and strong Asian demand also buoyed prices.
  • Brent crude futures rose 45 cents, or 0.9%, to $51.53 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose by 46 cents, or nearly 1%, to $48.28 a barrel. Both benchmarks hit their highest since early March.
  • U.S crude inventories fell by 3.1 million barrels in the week to Dec. 11, the Energy Information Administration said, more than analysts' expectations of a 1.9-million-barrel drop.
  • Also boosting oil prices, U.S. lawmakers edged closer to an agreement on a $900Bn virus-relief spending package on Wednesday with top Democrats and Republicans sounding more positive than they have in months about getting something done.

(Source: Reuters)

United States Hopes For Trade Deal With UK, Trump's Trade Chief Says - BBC Published: 17 December 2020

  • The United States is hopeful of sealing a mini-trade deal with the United Kingdom to reduce tariffs, President Donald Trump's trade chief, Robert Lighthizer, told the BBC.
  • Lighthizer said he was hopeful for a deal that could see punitive tariffs on Scottish whisky lowered.
  • He also suggested the UK would need to go further than last week's announcement breaking with the EU's support of European planemaker Airbus.
  • Britain will suspend retaliatory tariffs imposed on U.S. goods as part of a dispute over aircraft subsidies from Jan. 1, the first step to diverging from European Union trade policy.

(Source: Reuters)

Mixed Results In Producer Price Index Published: 01 December 2020

  • The Producer Price Index for the Mining and Quarrying industry increased by 3.8% while the index for the manufacturing industry decreased by 0.3% for October 2020.
  • The movement in the index for the Mining and Quarrying industry was influenced mainly by a 4.0% increase in the index for the major group ‘Bauxite Mining & Alumina Processing’.
  • The main contributor to the decline in the index for the Manufacturing industry was the major group, ‘Refined Petroleum Products’ which fell by 4.3%. However, increases in the index for the major groups, ‘Food, Beverages & Tobacco’ (0.7%) and ‘Chemicals and Chemical Products’ (0.1%) tempered the decline of the index for the industry.
  • The point-to-point index declined by 2.6% for the Mining & Quarrying industry and increased by 0.9% for the Manufacturing industry.

(Source: STATIN)

Inflation Expected to Rise Above BOJ’s Target Range Published: 01 December 2020

  • BOJ’s October 2020 survey indicated expected inflation of 6.3% for the calendar year 2020, which is higher than the October 2020 CPI outturn of 5.0%. The expected inflation 12 months ahead decreased to 6.7% relative to the previous survey outturn of 7.0%.
  • The perception of inflation control declined slightly in the October 2020 survey relative to the September 2020 survey.
  • The majority of respondents continued to believe that the Bank’s policy rate will remain the same over the next three months.
  • The Present Business Conditions Index reflected a lower level of optimism while the Future Business Conditions Index illustrated a sharp increase in optimism compared to the previous survey.

(Source: BOJ)

Panama Growth Forecast Revised Down Published: 01 December 2020

  • Fitch Solutions has revised its forecast for Panama’s real GDP growth to -13.2% and 7.9% y-o-y in 2020 and 2021, from -8.9% and 4.8% previously, as severe mobility restrictions caused the region’s deepest contraction in Q220.
  • While the government has begun to phase out many public health restrictions, limited fiscal support suggests a sluggish recovery over the coming quarters.
  • Over the medium-term, however, the agency maintains an upbeat growth forecast for Panama, as a robust private sector, supportive international trade trends, and major infrastructure investments will drive sustained growth.

(Source: Fitch Solutions)

Colombian Current Account Deficits Will Endure Published: 01 December 2020

  • Rebounding exports following the economic shock of the COVID-19 pandemic will help to narrow Colombia’s current account deficit in 2021 and the years thereafter. 
  • That said, Fitch Solutions expects that the country's current account shortfalls will persist over the coming years amid a subdued outlook for oil production and prices, combined with renewed demand for imports.
  • It has revised its 2020 and 2021 current account deficit forecasts to 4.0% of GDP and 3.9% respectively, from 4.4% and 4.0% previously, as remittance inflows have surprised to the upside in recent months. 

(Source: Fitch Solutions)

OECD Sees Global Economy Turning The Corner On Coronavirus Crisis Published: 01 December 2020

  • The outlook for the global economy is improving despite a second wave of coronavirus outbreaks in many countries as vaccines emerge and a Chinese-led recovery takes hold, the OECD said on Tuesday.
  • The global economy will grow 4.2% next year and ease to 3.7% in 2022, after shrinking 4.2% this year, the Organization for Economic Cooperation and Development said in its latest Economic Outlook.
  • After the second wave of infections hit Europe and the United States, the Paris-based policy forum trimmed its forecasts from September, when it expected a global contraction of 4.5% before a 5% recovery in 2021. It did not have a 2022 forecast at the time.

(Source: Reuters)

Oil Prices Steady As OPEC And Allies Seek Consensus On Output Published: 01 December 2020

  • Oil prices were broadly steady on Tuesday as investors awaited direction from OPEC and its allies after the producers postponed a formal meeting to decide whether to lift output from January.
  • Brent crude was down 1 cent at $47.87 a barrel and West Texas Intermediate was down 9 cents at $45.25.
  • Both contracts have surged around 27% in November, pushed up by hopes that COVID-19 vaccines would boost the global economy and fuel demand, and aided by expectations that oil producers would keep a tight rein on output amid a new wave of the virus.

(Source: Reuters)