Rising approval for Milei as inflation eases boosts Argentine assets, with the peso firming and stocks climbing amid improved political and economic outlook.
Easing inflation under Milei's watch reduces depreciation pressure on the peso; rising political approval lowers sovereign risk and attracts capital flows, supporting the currency.
Higher approval reduces the odds of policy reversals or social unrest, which lowers the country risk premium. This encourages foreign investment and reduces demand for dollarization, strengthening the peso.
If inflation trends lower, the central bank may slow the crawling peg depreciation, which would lead to a more stable peso. Short-term USD/ARS could test support at 1,000 if confidence builds.
Argentina's state oil company YPF stands to benefit from improved macro stability and lower country risk, as investor sentiment shifts toward Argentine equities amid easing inflation and political tailwinds.
YPF is sensitive to Argentina's country risk and economic outlook. A more stable political environment and lower inflation reduce the discount rate applied to its future cash flows, making the stock more attractive to both domestic and international investors.
YPF remains reliant on global oil prices and Argentine energy policies. If Milei's austerity slows economic activity too much, domestic fuel demand could weaken. Additionally, any resurgence in inflation would quickly reverse gains.
President Javier Milei’s approval rating rebounded from its record low in May as Argentine inflation showed signs of cooling, lifting market confidence in his austerity program. The peso strengthened and local shares rallied on expectations that political stability and disinflation will unlock investment and ease recessionary pressures.
Approval recovered from its low as inflation, the top concern for Argentines, showed early signs of moderating after Milei's aggressive fiscal tightening and devaluation. Voters are beginning to credit his policies with stabilizing the economy.
Higher political capital and improving macro metrics strengthen Milei's hand in ongoing talks with the IMF, potentially unlocking further funding or revised targets, which would further bolster market confidence.
While the data is preliminary, the combination of falling inflation and rising approval suggests the austerity program is gaining traction. However, sustained improvement depends on continued disinflation and avoiding social unrest.