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Carry Trade Unwind Weighs On MXN, Focus On July CPI, Banxico Rates This Week

MEXICO
  • The global sell-off in risk assets continues to support USDMXN, which is still trading up more than 3% at the time of writing. The pair has traded through both the post-election highs around 19.00 and 19.2322, the March 2023 peak, reaching 20.2181 overnight, its highest level since September 2022, before paring gains. Meanwhile, the rally in the yen has prompted a more than 5% sell-off in MXN/JPY, which hit its lowest since March 2023 earlier.
  • On the data front, July formal job creation figures may be released today. Later this week, attention will turn to the July CPI figures on Thursday, which come just ahead of the Banxico monetary policy meeting later that day. Analysts currently lean towards a 25bp cut to 10.75%, but most survey responses will have come prior to today’s move in MXN, which may prompt a more cautious stance from policymakers.
  • Meanwhile, President-elect Sheinbaum is due to hold a press conference at 1830BST(1330ET), following a meeting with state governors to discuss strategic projects.

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