The U.S. Dollar Index (DXY) may face further retracement as Latin American markets experience relief following a softer U.S. CPI print, according to Citi's latest report. The report highlights that the strength of the USD and local rate paths are contingent on upcoming measures from President Trump's inaugural speech, which could influence dollar positioning. "Risks today remain biased to uncertainty regarding the extent of the announcements in Trump’s inaugural speech," Citi analysts note.
In Brazil, the Central Bank's activity indicator showed economic stability in November with a 0.1% MoM and 4.1% YoY growth, while the central government posted a BRL 4.5bn primary fiscal deficit, better than expected. Mexico's internal demand indicators softened, with gross fixed investment down 4.5% YoY in October. Meanwhile, Chile's government reached new agreements on pension reform, and Ecuador's GDP contracted by 0.2% MoM in 3Q24. These regional dynamics, coupled with the potential for a dovish tilt in Colombia's central bank, suggest a complex landscape for the DXY as it navigates both domestic and international economic factors.