The communication from Banxicols board had been quite clear that the initial cut was a irecalibration' and they didn't want to signal the start of an easing cycle, so a hold today was in line with this communique. However; a unanimous vote to hold has a much more hawkish weight than econ had anticipated (Rafa in econ mentioned this would be a close decision). USDMXN has been feeling some grind-lower pressure ever since the FOMC outcome and the Fed removed the right tail of resuming hikes. In an environment of more stable US rates; a gravitational move back towards carry strategies is attractive. Obviously, there is still the US CPI hurdle to clear and most of market participants have been waiting for this for further directionality. It is worth noting tat CTA strategies had flipped to net long USDMXN in the aftermath of the move higher, but their stops out of USD longs are very close below. This hawkish hold could be the catalyst needed to further see acceleration through these stops and some additional momentum for USDMXN lower.- UBS Strategy
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