Finance. The announcements and the measures did not calm the free dollar
The focus of Silvina Batakis’s conference on Monday was sound, but there were few concrete economic measures, leaving little to no taste in the market. The minister spoke of reaching fiscal balance and meeting the goals with the IMF. However, the execution to achieve the aforementioned objectives was very unclear. Disbelief prevailed in the market, with country risk crossing 2,700 points (maximum in two years) and Argentine global risk touching new post-restructuring lows.
In practice, the first measure went the other way. The perception of Profits in the card or tourist dollar was increased from 35% to 45%. A definition that is far from bringing relief to the stressed exchange rate dynamics. After overcoming the political uncertainty with the change of minister, financial dollars consolidated around $285/295. There are already 5 consecutive wheels with a gap above 120%. Is it sustainable? For now, this measure puts an 80% resistance to the officer’s gap with the financiers.
Inflation in June was 5.3%, marking four consecutive months above 5% for the first time in more than 30 years. For the next few months, everything indicates that nominality will be growing. The issue exceeded 2% of GDP between June and July to directly or indirectly finance the Treasury, setting a very bad precedent for the coming months. In principle, the high frequency data shows a marked acceleration in prices in the first week of July, while the crawl peg keep running behind.
Inflation in the US was higher than expected and reached its highest level in 41 years. There is no doubt that the FOMC meeting (July 27) should come with an increase of at least +75bps. After the publication of the data, the market began to price with a probability of 80% a rise in the rate of +100bps when at the beginning of the month nobody expected a jump of such magnitude. Paradoxically, the US10Y fell below 3%. Why? ORAn even more aggressive Fed implies that the recession could be more significant.