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In today's newsletters, the financial landscape unfolds with distinct shifts in currency markets and trade dynamics. The yen takes center stage as it weakens following the Bank of Japan's meeting, where a cautious stance on removing negative interest rates influences global bond yields and sparks a reassessment of interest rate expectations globally. On the geopolitical front, President Joe Biden's decision to pull back from a post-Brexit trade deal with the UK sends ripples through transatlantic relations, with talks abandoned and the potential for revival under a second Trump administration. Additionally, in emerging markets, the South Korean won leads losses among Asian currencies as comments from Fed officials temper expectations of early interest-rate cuts, shaping the trajectory of regional bonds and influencing the performance of other currencies, including the Chinese yuan and the Japanese yen. The intricate dance of global economic forces continues with varied impacts on different nations, from the resilience of the Mexican and Colombian peso to the challenges faced by the Malaysian ringgit in a shifting financial landscape.

– Matheus Zani & Daniel Porto

R&D Featured Article

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2. Joe Biden Pullsback Post-Brexit Trade Deal

President Joe Biden has dashed hopes for a post-Brexit transatlantic trade deal with the UK, citing opposition from members of his Democratic Party and a lack of agreement on the deal's size. Talks, initially set to start in October, have been abandoned, but Whitehall sources suggest the agreement could be revived under a second Trump administration. British exports to the US account for 17%, and while negotiations have faced challenges, a potential deal may depend on the outcome of the next US election. Biden's focus on labor protections and the lack of progress in talks have been points of contention, with the possibility of a deal contingent on future political developments.

3. South Korean Won Leads EM Losses

The South Korean won led a decline in most emerging Asian currencies as comments from Fed officials tempered expectations of early interest-rate cuts next year. The Chinese yuan also declined for a third day, while the PBOC maintained a stronger-than-expected fixing. Asian bonds remained steady, with the 10-year benchmark India bond hovering at 7.16%. The yen fell against the dollar as the Bank of Japan maintained its negative interest-rate policy. Among Group-of-10 currencies, others strengthened against the greenback. Meanwhile, Brent oil prices have fallen nearly 20% since the 2023 peak in September, impacting net oil-exporting currencies differently. The Mexican and Colombian peso have been top performers, benefiting from higher carry and unchanged rates, while the ringgit lags due to the absence of a "carry defense" and a historically low policy rate relative to the Fed's. Malaysia's policy rate offers the largest discount on record, standing at 250bps below the Fed's rate.

Charted Territory

What to look out for today

JPY - BoJ Press Conference
EUR - CPI (Nov)
BRL - BCB Copom Meeting Minutes
CAD - CPI (Nov)

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