Monday saw J.P.Morgan hedge their "MXN........>

FOREX: Monday saw J.P.Morgan hedge their "MXN overweight with a BRL underweight,

taking Latam FX to neutral (from overweight). The risk-reward for remaining

directionally overweight FX in Latam has diminished, with some pockets of

increasing COVID-19 infections in parts of the Middle East as well as in select

US states and in parts of Beijing, which is important for sentiment given the

role that China's V-shaped recovery has likely played in the EM FX recovery. As

well as the overall beta, for MXN we are also concerned that our economist's

call for more policy rate cuts than currently priced by the market will weigh

further on the peso in H2. High real rates (an important distinguisher for MXN)

could be eroded faster than the market expects should J.P. Morgan's forecasted

rate cuts be delivered. We hedge this risk with a BRL FX underweight. BRL has

outperformed over the last month despite heightened idiosyncratic risks; we see

scope for underperformance. The Real has been the best performing EM currency

over the past month despite challenging fiscal/debt dynamics and a steep

COVID-19 curve. We see scope for underperformance given unappealing short-term

valuations and further central bank policy easing as soon as this week."