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MEXICO: Could Positioning Dynamics Provide Another Peso Tailwind?

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • Per the latest CFTC data, indicative positioning showed leveraged investors added to MXN shorts, and while this is likely to have shifted over the past week given the peso appreciation, it begs the question whether positions may need to be unwound further as the Mexico right tail gains traction.
  • We highlighted earlier this week that Banorte continued to see value in tactical USDMXN longs, and suggest buying dips around the 20.20 area, while CIBC also continue to favour buying USDMXN dips below 20.20 into the end of the month.
  • BBVA believe the pause on the imposition of most US tariffs and Mexico’s decision not to implement retaliatory measures seem to be supporting the currency’s relative strength. They add that after the 20.20 breach, the 20-handle is in sight, with expected heavier movements below.
  • According to BBVA, recent lower US yields driven by lower inflation readings and the US equity correction have been supportive of EM and LatAm FX, but this may be the case only as long as expectations are that the US economy makes a soft landing, as opposed to broader concerns about a potential US downturn.
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  • Per the latest CFTC data, indicative positioning showed leveraged investors added to MXN shorts, and while this is likely to have shifted over the past week given the peso appreciation, it begs the question whether positions may need to be unwound further as the Mexico right tail gains traction.
  • We highlighted earlier this week that Banorte continued to see value in tactical USDMXN longs, and suggest buying dips around the 20.20 area, while CIBC also continue to favour buying USDMXN dips below 20.20 into the end of the month.
  • BBVA believe the pause on the imposition of most US tariffs and Mexico’s decision not to implement retaliatory measures seem to be supporting the currency’s relative strength. They add that after the 20.20 breach, the 20-handle is in sight, with expected heavier movements below.
  • According to BBVA, recent lower US yields driven by lower inflation readings and the US equity correction have been supportive of EM and LatAm FX, but this may be the case only as long as expectations are that the US economy makes a soft landing, as opposed to broader concerns about a potential US downturn.