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Risk Sentiment Underpinning MXN Strength

MEXICO
  • The more benign backdrop for risk continues to support MXN on any dips. Despite a brief pop to 18.15 in USDMXN in the aftermath of the US ISM data on Monday, the pair is slowly gravitating back towards the 18.00 mark.
    • The obvious target for the move remains at 17.8981, the Mar 9 low and a key support. A breach of this level would pave the way for weakness towards 17.5746, the Aug 25 2017 low.
  • March CPI data on Wednesday will be the focus where the core component is expected to decline to 8.07% from 8.29%. A downside surprise will bolster the view that Banxico may have come to the end of its tightening cycle following last week’s 25bp hike, especially in the context of Deputy Governor Heath’s comments on the terminal rate yesterday on twitter.

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