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TD Securities Add Short CHFMXN To Model Portfolio

MXN
  • TD Securities have added a short CHFMXN trade to their model portfolio, targeting a move near the recent range lows in the next 1-2 months. CHFMXN screens as one of the most attractive pairs on TD’s HFFV model along with favorable signals in their carry and terms of trade baskets.
  • TD note that with inflation headed the right way, Fed speakers seem to be indicating a preference to wait and see. The stronger than expected payrolls did more to raise expectations of a soft landing and higher for longer than add to pricing of Fed hike. The Fed is also softening up to the idea that the market repricing is doing some work for them. A US CPI report in line with TD’s US macro team's expectation of a soft 0.3% m/m for core will also be supportive of their trade.
  • Carry strategies like lower vol and supportive risk. While the last few weeks have been anything but that, the market environment has shown signs of a pivot. The news around China stimulus and the bottoming out of macro data could help to reverse the USD.
  • A key risk to their trade is from an escalation of the war is Israel which can raise preference for safe havens including the CHF, though the potential terms of trade impact could benefit MXN.
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