Thoughts on LatAm Inflation and USD Dynamics

Watching the recent CPI figures out of some LatAm economies, particularly the stickiness in services inflation, despite fairly aggressive rate hiking cycles. The market seems to be pricing in a swift pivot, but I'm not entirely convinced some of these central banks will have the room, or the political will, to cut as quickly as anticipated if core inflation remains elevated. This could lead to a re-evaluation of carry trades if the global risk environment shifts.

On the other side, the dollar strength, or lack thereof, has been a significant tailwind for many EM assets. If we see a resurgence in US exceptionalism or a hawkish shift from the Fed that's not currently priced in, that's going to put considerable pressure on EM FX, especially those with larger external financing needs. For now, my watchlist remains fairly balanced, but I'm keeping a close eye on any divergence in central bank rhetoric between developed and emerging markets.