CTAs have switched to 17% net long MXN versus USD, compared to 50% net short the last report. Continued tariff conversations between US President Trump and Mexican President Sheinbaum appear to be heading in the right direction, MXN positive.
USDMXN traded better bid overnight alongside broader USD, but MXN underperformance extended into the local open with a quick break through 20.20. As I had been advocating, that was a pop to sell and the desk saw sponsorship from the real money community. For now I continue to like selling pops. The main action today was in FX swaps where the real money community came and aggressively sold. Hedge funds had already been fading in fwd-fwd over the past few sessions as I had been highlighting certain dislocations in basis. Now with the added interest from real money, basis collapsed across the board with 1yr ~7bp lower on the day. I continue to hold, looking for another leg into month-end. Funding remains supported with funding trading closer to 9.6/9.7%. - UBS Strategy
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