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USDMXN Rises To Session Highs, CIBC Expect 17.42-43 To Cap Topside

MEXICO
  • The broad greenback bid and the associated weakness for the EMFX basket sees USDMXN print fresh session highs in recent trade. As well as these dynamics, market concerns over the domestic fiscal backdrop are becoming evident, with an ex-central bank deputy governor recently expressing his views to MNI.
    • “The extraordinary fiscal relaxation for 2024, aimed at unproductive works and subsidies practically impossible to reverse, constitutes not only a hurdle to Banxico's efforts to contain inflation but, above all, a serious government irresponsibility”, the former deputy governor said.
  • CIBC have highlighted that any repricing of the Fed’s and/or Banxico’s easing cycle in 2024 remains skewed towards a compression of the relative monetary policy stance between Mexico and the US and a weaker MXN. They still expect Banxico to signal that they will start its easing cycle in March. CIBC note they would not rule out a dissenting vote (25bps cut) next month should any of the remaining inflation data (bi-weekly CPI and expectations) surprise to the downside. In the meantime, CIBC expect USD/MXN’s upside to remain capped by its 100-DMA at 17.42-43.

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