The US-China trade war puts the peso to the test

The week before the beginning of the primary elections with headwind international level. The United States and China have decided to further accelerate their trade confrontation and put pressure on global financial markets. This, in Argentina, was reflected in a dollar jump of 84 cents. The currency thus reached its maximum level in three months.

The ingredient that makes things even more unstable is the proximity of primary elections. Financial badysts and economists believe that, even though it is an internal market, the market is currently operating with an anticipated result of: a good choice from Alberto Fernández. And that, from this base, two premises are maintained.

If the difference with the party in power was greater than expected (between 3 and 5 points), the negative impact on the exchange rate, the Argentine equities and bonds could be perceptible. On the contrary, a smaller gap would create investor optimism and, consequently, an improvement in these variables.

On Monday, the Chinese People's Bank decided to allow a devaluation of the yuan, in order to gain competitiveness in the global market compared to the United States. Analysts read this determination as a response from the Asian giant Donald Trump who, at the end of last week, had increased the rates applicable to certain products of Chinese origin.

For María Castiglioni Cotter, economist at the C & T Asesores consulting firm, one of the origins of the new chapter of the trade war between the two major economies of the world "concerns China whose growth is less important". "There is a huge surplus with the US What Trump did was to limit the Asian giant's exports to his country with tariffs for: reduce their competitiveness"he explained.

"Now, the Chinese government has chosen to devalue.It is what generates the idea that the war is not over and that it has a global impact." Fear, especially , is that Chinese growth is slowing down and that it implies less product demand (soybean oil, among others) because it is one of the world's leading importers, "said Castiglioni Cotter.

Financial badyst Ailín Do Pazo Glave, meanwhile, invites to consider the process of commercial tension as an opportunity for Argentina. "This trade war benefits the country, which is naturally a producer, and since the" war " the world signs any contract, like that of Mercosur with the European Union. And this is due to the closure of major economies, "he said.

"In this conflict, we must be strategists on how to negotiate and conclude good treaties.It is something very important because it is the pillar of the" real "economy that we do not see at this time. stage, but that we will be able to notice in the future, "says Do Pazo Glave.

The impact on Argentine financial variables was such that the country risk increased by 75 units to 904 points, its highest level in two months. Argentine badets such as equities and bonds traded all day down.

"It does not seem to me that this Monday is temporary.We will see the exchange rate float up.On the other hand, interest rates were already slightly up.We will have to see how the risk country and stock market will continue over the next few days, but I see it more related to what is happening on the outside than to internal problems. There is nothing new on our market that could have generated this jump abruptly, "he said in dialogue with TN.com.ar Matías Carugati, Chief Economist of Management & Fit.

The overheating of the exchange takes place a few days after the primary, open, simultaneous and mandatory elections (STEP). In the last 20 days, the dollar increased by 9.35%that is to say, he has already recovered almost the entire fall he had had during the two and a half months of the financial "summer" between the beginning of May and the middle of July.

Analysts see how the Central Bank will act this week to avoid further depreciation of the peso. "We will have an active BCRA in the sale of future dollar contracts to avoid a steep "slope" of the futures curve (that is, an expectation of further devaluation in the coming months) and an increase in the Leliq rate to eliminate weights in circulation and control the counted dollar, "he said before the consultation the director of EcoGo, Federico Furiase.

According to Do Pazo Glave, "the important thing is to regulate national macroeconomic problems". "Since Argentina is in a state of imbalance, the global tension has an impact on bonds, not on the exchange rate." The Central Bank has sufficient tools to act has intervened on the futures marketthis allowed the pressure not to go completely to weight, "he concluded.

Beyond the surprises that may exist at the international level, the market is attentive to the results of the primary elections. The investment forecasts indicate a distance of 3 to 5 points between Alberto Fernández and Mauricio Macri, according to the different sources of the the city and economic consultants before TN.com.ar.

This is just a basic scenario. If the PASS ends with a result outside the expected range, the reaction could be negative or positive vis-à-vis the Argentine peso and other badets, which ultimately constitutes the final gap between the two main candidates.

"What will happen next Monday on the market will depend on the STEP." There is a bad result for the government could return the pressure of exchange. I think that a bad vote would be that the opposition has more than six points against Mauricio Macri or that it gets closer to the 45% who give you the victory in the first round, "Furiase said.

In this sense, Carugati said that "it is very difficult to see a clear political trend". "The market bought the thesis that there will be a small difference in favor of Fernández and María Eugenia Vidal in the fighting in the province of Buenos Aires. The smaller the difference, the better it will be perceived by the the city, while more than five percentage points seem indisputable to Macri, "he said." The badyst Management & Fit feared that if the Front of All got a large stream of votes in the STEP, there would be a to sell (mbad sale)".