USDARS: The peso's depreciation is legislated now

GM gentlemen,

Most debasement trades on my screen are really flow bets: how long gold holds its bid, whether crypto's hedge story survives the next rates print. USDARS is the one where the depreciation is written down in advance. The catalyst is structural, not a headline. On December 15 BCRA's Bausili announced that from January 1 2026 the band's ceiling and floor step up each month by the prior inflation print on a two-month lag, replacing the old fixed 1%/month crawl. That roughly tripled the ceiling's climb rate, from 1% to the 2.5-3.4% the MoM prints have been running. At 2.5%/month it compounds to ~34% annualized band depreciation, ~49% at 3.4%. The band stopped being a line the central bank defends by hand. It's a programmed glide now.

Rebuild the ceiling off the actual INDEC prints: ~1,516 end-2025 base, then +2.5 (Jan), +2.8 (Feb), +2.77 (Mar), +2.9 (Apr), +3.4 (May), +2.6 (Jun). That puts today's ceiling near ~1,790, against spot at 1,477. The gap is ~21%, which is where my first target box sits. So +20% isn't a breakout call, it's the top of the band as it stands today. Forward the glide at ~2.3%/month and the ceiling tags ~1,830 in July, ~2,050 by December. Target #1 is just the band doing what the rule says it will. The arrow sits on the ceiling, not above it.

Target #2 is 2,355, and that one isn't on the same map. It's ~15% above where the band is programmed to close 2026, roughly +59% from spot. Two ways to get there. The slow way: keep gliding at ~2.3%/month and the ceiling itself reaches 2,355 around the middle of 2027, right as the presidential race heats up. The fast way is the disaster, inflation re-accelerates, the crawl can't contain spot, and the band breaks the way it nearly did in October 2025. A forced step instead of a glide. Same price, completely different regime.

That second path is where the chart stops being just a chart, and this part is my read rather than anything the band prints for you. Milei's whole program rests on the FX anchor and the disinflation it buys, underwritten by the IMF deal. The crawling band is the stabilization. Break it and you reverse the one thing voters actually credit him for, prices coming down. A devaluation jump feeds straight back into inflation and real wages, with maybe a year to the October 2027 vote. The rhyme is Macri 2018: managed FX under an IMF program, it broke, the peso roughly doubled, and he lost 2019 to the Peronists. A broken currency regime has a brutal base rate for whoever's in office here. The nuance that matters is the path, not the number. A slow grind to 2,355 is survivable, because people expect the crawl and wages can chase it. What ends governments in Argentina is the discontinuous break and the inflation spike behind it. So target #1 is the program working as designed, and 2,355 reached the slow way is the glide simply arriving on time. Only 2,355 reached the fast way is the model cracking into an election.

To hit the first target you need dollar demand to press spot back to the band edge, and that leans on net reserves that are still thin (negative on IMF accounting), the external-debt calendar, and confidence holding through H2. The global tape helps the long side, a higher-for-longer dollar, Bessent out defending "dollar dominance," the yen at a 40-year low. This is a long-dollar trade with a legislated floor under it. If disinflation genuinely surprises, monthly prints toward 1.5%, the ceiling climbs slower and spot has to carry the move instead. Even then the asymmetry favors USDARS, because a band is far easier to break up than to hold.

So watch reserves and net dollar demand. The monthly CPI print is mostly noise here, since the band climb is already known and baked into the rule. Just know the second target carries a political bill the first one doesn't.

Best of luck. Cheers,
Ivan Labrie.