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MEXICO: USDMXN Edges Lower as Markets Mull Cabinet Appointments

MEXICO
  • USDMXN came to life late Thursday as Sheinbaum announced her initial cabinet appointments. The news was well received by the market and USDMXN traded as low as 18.2570 shortly afterwards. Spot retraced to around 18.40 into the close, however, we have resumed a steady downward trajectory this morning, inching below 18.30 in recent trade. Support at the 20-day EMA has moved up to 18.00.
  • As a reminder, the announcements of Marcelo Ebrard as economy minister and former UN ambassador Juan Ramon de la Fuente as foreign minister are seen as positive developments. In particular, the Ebrard appointment has been highlighted given he is someone with experience of negotiating with the US and is widely seen as having a more moderate profile.
  • BBVA have noted the USDMXN pullback is consistent with a decline in technical indicators that previously signalled extreme overbought conditions. Although the volatility of the exchange rate has fallen in recent days, it remains above the average of the last 12 months and the pipeline of upcoming events will likely keep volatility relatively high.

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