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CIBC Don’t Expect Positive Environment For MXN To Continue Beyond Q2

MEXICO
EM BulletHomepagemarkets-real-timeBulletEmerging Market News
  • CIBC’s base case scenario into this weekend’s election anticipates Claudia Sheinbaum winning the presidency with a government coalition majority in the Senate and the Chamber of Deputies, providing little change to the current state of politics in the country. However, CIBC don’t expect the positive environment for the MXN to continue beyond Q2.
  • Despite the cautious stance adopted by the Fed, CIBC expect Banxico to cut rates by 100bp by end 2024. Meanwhile, the lack of a credible fiscal plan will ignite concerns of negative outlooks from ratings agencies into the medium term. At the same time, tariffs/migration/security headline risks into the US Presidential election and a new appointment to the Mexican Supreme Court in December will put MXN on a defensive mode. CIBC keep their Q3 USDMXN forecast at 18.00.
  • On rates, a Sheinbaum victory with an absolute majority for the government coalition leaves fiscal and institutional risks intact into H2. Hence, CIBC still do not see long outright positions as attractive enough. Instead, they continue to favour 2Y-10Y steepeners in the MBONO curve, in line with a faster-than- expected Banxico easing cycle and increasing fiscal risks, absent a fiscal reform and given ongoing support to Pemex.
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  • CIBC’s base case scenario into this weekend’s election anticipates Claudia Sheinbaum winning the presidency with a government coalition majority in the Senate and the Chamber of Deputies, providing little change to the current state of politics in the country. However, CIBC don’t expect the positive environment for the MXN to continue beyond Q2.
  • Despite the cautious stance adopted by the Fed, CIBC expect Banxico to cut rates by 100bp by end 2024. Meanwhile, the lack of a credible fiscal plan will ignite concerns of negative outlooks from ratings agencies into the medium term. At the same time, tariffs/migration/security headline risks into the US Presidential election and a new appointment to the Mexican Supreme Court in December will put MXN on a defensive mode. CIBC keep their Q3 USDMXN forecast at 18.00.
  • On rates, a Sheinbaum victory with an absolute majority for the government coalition leaves fiscal and institutional risks intact into H2. Hence, CIBC still do not see long outright positions as attractive enough. Instead, they continue to favour 2Y-10Y steepeners in the MBONO curve, in line with a faster-than- expected Banxico easing cycle and increasing fiscal risks, absent a fiscal reform and given ongoing support to Pemex.