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MEXICO: Analyst Views of USDMXN at Current Elevated Levels

MEXICO
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  • *CIBC believe a break above 20.00 will open the path for a retest of August’s high at 20.2181. However, they say provided we don’t see other reforms (i.e. elimination of regulatory bodies, energy reform) being pushed through congress at the same speed this month, this should provide attractive levels for tactical USD/MXN shorts given the much cleaner MXN positioning and the higher odds of an on-hold Banxico in Sep.
  • *Commerzbank: While it has become clearer in recent weeks that the necessary two-thirds majority will be achieved, and the Alliance's desire to push through reforms as quickly as possible, the peso is likely to remain under pressure. There are also claims that the judicial reform violates the North American Free Trade Agreement, and CIBC therefore think that USD-MXN is likely to test higher levels in the coming days.
  • *Natixis note the AMLO administration leaves Claudia Sheinbaum a more fragile country with a weaker rule of law. The next players to watch are the rating agencies (let's see if they publish opinions on the passage of these terrible reforms) and real money. If real money goes from slightly overweight to slightly underweight, the pain in the MXN would be relentless.
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  • *CIBC believe a break above 20.00 will open the path for a retest of August’s high at 20.2181. However, they say provided we don’t see other reforms (i.e. elimination of regulatory bodies, energy reform) being pushed through congress at the same speed this month, this should provide attractive levels for tactical USD/MXN shorts given the much cleaner MXN positioning and the higher odds of an on-hold Banxico in Sep.
  • *Commerzbank: While it has become clearer in recent weeks that the necessary two-thirds majority will be achieved, and the Alliance's desire to push through reforms as quickly as possible, the peso is likely to remain under pressure. There are also claims that the judicial reform violates the North American Free Trade Agreement, and CIBC therefore think that USD-MXN is likely to test higher levels in the coming days.
  • *Natixis note the AMLO administration leaves Claudia Sheinbaum a more fragile country with a weaker rule of law. The next players to watch are the rating agencies (let's see if they publish opinions on the passage of these terrible reforms) and real money. If real money goes from slightly overweight to slightly underweight, the pain in the MXN would be relentless.