Latam FX and stocks recover as Israel-Iran ceasefire boosts sentiment, reversing losses from US-China trade tensions and tariff worries.

Latam FX and stocks rebounded as the Israel-Iran ceasefire boosted sentiment. The ceasefire helped alleviate concerns over escalating tensions in the Middle East, which had weighed on asset prices earlier in the week. The recovery was also driven by the easing of US-China trade jitters and positive economic data from emerging markets.

In a significant shift in geopolitical sentiment, Latin American (Latam) FX and stock markets rebounded on Tuesday, June 19, 2025, following the announcement of a ceasefire between Israel and Iran. This development alleviated concerns over escalating tensions in the Middle East, which had previously weighed on asset prices. The recovery was further boosted by the easing of US-China trade jitters and positive economic data from emerging markets.

The ceasefire, confirmed on Tuesday, placed further pressure on the US Dollar Index (DXY), which was trading near 97.65, just above its June low of 97.61 [1]. The Federal Reserve Chair Jerome Powell's hawkish remarks, emphasizing a data-dependent approach and expressing no hurry to cut rates, were overshadowed by the geopolitical developments [1]. The USD Index fell below 98.00, with immediate resistance forming at that level, and the Relative Strength Index (RSI) nearing oversold territory, suggesting short-term momentum may be stretched [1].

Latin American currencies and stocks showed resilience, with the MSCI Latam FX index up 0.6% and the MSCI Latam stocks index jumping 1.6% [2]. The Israeli shekel (IRS=) strengthened 1.4% to an over two-year high, while Mexican peso (USDMXN) gained 0.6% and Brazilian real (USDBRL) rose 1% [2]. The ceasefire also lifted sentiment in other Middle Eastern markets, with Turkish stocks (XU100) ending 3.5% higher and Saudi stocks (TASI) logging a 2.4% gain [2].

The recovery was driven by a combination of easing geopolitical tensions and positive economic indicators from emerging markets. Mexico's headline inflation rose in line with expectations, while Brazil signaled a potential pause in rate hikes [2]. Colombia's peso (USDCOP) was near flat, buoyed by the weakness in the dollar and falling oil prices [2].

Investors are now watching for rate decisions from Mexico, Argentina, and Colombia. The ceasefire has provided some relief, but markets remain sensitive to headline risk from the region [2]. The recovery in Latam FX and stocks underscores the impact of geopolitical stability on global asset prices.

References:
[1] https://www.fxstreet.com/news/us-dollar-slides-as-israel-iran-ceasefire-overshadows-hawkish-powells-tone-202506241611
[2] https://www.tradingview.com/news/reuters.com,2025:newsml_L4N3SR14F:0-latam-fx-stocks-recover-as-israel-iran-ceasefire-lifts-sentiment/