Peso Under Further Pressure

Continued weakness in MXN from the open as local developments continue to keep the Peso on the backfoot. Additionally, the morning's risk off feel in equities, prompted some demand for the US Dollar and kept USDMXN elevated to it's highest levels since November.

We previously noted a confirmed break of 20.60 would constitute the bull trigger and reinstate a bullish theme. Multiple previous highs have been broken and notably, EURMXN has broken back above 25.00 which could spur momentum selling of the Peso. The next level of significance for USDMXN remains 20.85 which was previously an important breakdown level from late last year.

• The main themes are being dominated by last week's Pemex aid package announcement and raised concerns that fiscal austerity efforts might be hurt.
• Additionally, there are apprehensions regarding President AMLO's steadfast approach to his energy initiative. Last week's outages exposed the important limitations of current energy policies, and the little margin of error of policymakers when facing sudden shocks like last year's pandemic.
• As a third component, the seemingly dovish unanimous central bank decision to cut rates and rhetoric surrounding the potential for more cuts has added to the headwinds for the currency.

NEWS:

• Late Friday, the energy committee of Mexico's lower house advanced an electricity bill backed by President Andres Manuel Lopez Obrador, which will be presented to the full chamber Feb. 23, El Universal reported.
• Argentina President Alberto Fernandez begins his first full day of a three-day Mexico visit.