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Quiet Session Ahead of Thursday's Banxico Meeting

MEXICO
  • Focus remains on Thursday's Banxico decision, at which the bank are seen hiking the overnight rate by 25bps to 4.75%. Particular attention will be paid to any split among the governing board, following continued disagreement among the board in recent months.
  • Full MNI preview here: https://marketnews.com/mni-banxico-preview-septemb...
  • Domestic newsflow has been relatively few and far between, although the Mexican stability council overnight flagged that the economic and financial environment remains wholly influenced by the COVID-19 pandemic. Nonetheless, the banking system remains solid given favourable liquidity and capital positions.
  • MXN remains at the whim of the USD, with USD/MXN rallying sharply Tuesday to touch 20.3939, a new September high. A break back above here opens the mid-August highs of 20.4564 and levels not seen since June.
  • Tuesday's moves helped prop up front-end vol markets, which clear north of 10 points at time of writing. USD/MXN call vol was favoured, putting 1m risk reversals back toward 2.5 points in favour of upside.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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