Peruvian outlook after first round of presidential elections – BBH

By FXStreet According to analysts from Brown Brother Harriman, the next president will continue a pro-business model; Peruvian bonds could start outperforming amid falling inflation and the sol (PEN) have neutral fundamentals.

Key Quotes:

“The next president is unlikely to deviate from the pro-business model. The new administration will inherit an economy that is in good shape despite low copper prices, due to the nation’s adherence to sensible economic policies (…) Both Fujimori and Kuczynski are expected to continue with orthodox economic policies.·

“The economy remains sluggish. GDP growth is forecast to accelerate modestly to nearly 3.5% in 2016 from 3.2% in 2015. The IMF forecasts 5.5% growth in 2017 and 4.8% in 2018, but this seems too optimistic. GDP rose 4.7% y/y in Q4, stronger than expected and the most since Q1 2014.”

“The sol has generally performed in the middle of the EM pack. In 2015, PEN lost -13% vs. USD. This compares to the worst performers ARS (-35%), BRL (-33%), ZAR (-25%), COP (-25%), and RUB (-20%). So far this year, PEN is up 3.5% YTD and is lagging the best performers BRL (+12%), MYR (+10%), and RUB (+10%). Our EM FX model shows …read more

Source:: FX Street