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Broad MXN Strength Extends, Crosses Close In On 2022 Extremes

MEXICO
  • USDMXN sits moderately lower on Friday approaching the US ISM services data, extending the recent bearish theme for the pair. As we close in on touted support at the 18.00 mark and the 2018 lows of 17.9401, it is worth noting that some MXN crosses are also approaching some key resistance points that capped the peso rally in 2022.
  • Analysts at BBVA said the peso will soon breach the 18 per dollar level and “remain strong” in the range of 17.5 per dollar to 18.30 per dollar, stating it is not yet time to short the local currency.
  • For the crosses, attention in EURMXN is on last year’s lows at 19.1483, where a breach of this level would place the pair at the lowest level since 2016. In similar vein, MXNJPY came within close proximity of the 2022 high at 7.5799 during Thursday’s trading session. Above here would place the cross at levels not seen since 2015.
  • Banxico’s quarterly report has had little impact on analysts’ forecasts for the March 30 Banxico decision, with consensus expecting the board to slow the hiking pace to 25bps after the February surprise.
  • However, there is some discrepancy between the expected terminal rate. An example pointed out yesterday was both Barclays & Goldman Sachs maintaining their terminal rate calls of 11.25% and 11.50% respectively.

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