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ING Say Banxico Move To Slow Not Reverse The USDMXN Trend
- ING have highlighted that unlike Chinese authorities, Mexican authorities are seemingly expressing a view that the peso is too strong.
- Given the peso has been a prime beneficiary of the carry trade, markets should not underestimate the risk of a further correction higher in USD/MXN ahead of this long US weekend.
- Yet USD/MXN has traded below 17.00 for very good reasons, including high carry and nearshoring trends. And given ING’s view that the dollar does turn lower next year, they see the Banxico move as slowing rather than reversing the USD/MXN trend.
- Two further points highlighted by ING: returns on the MXN carry trade may now come more from carry than nominal MXN appreciation, and speculation may grow in the TIIE market (Mexican swap curve) that Banxico may prefer early rate cuts after all if it does not want its currency to strengthen much more.
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.