USD / MXN hovers around 19.55-20.00 as Banxico political uncertainty persists – Credit Suisse
Credit Suisse strategists are looking towards a USD / MXN 19.55-20.00 range, from the previous target of 20.00. The main reason is that they see the political uncertainty in Banxico partially offsetting the positive macroeconomic factors.
Balance of payments data continues to show a very favorable picture for the peso
“The balance of payments continues to show favorable spillovers from US stimulus demand through remittances and merchandise trade channels, while foreign direct investment remains strong and legal challenges through the mechanism channel. USMCA resolutions have so far been benign. Additionally, it should be noted that the threat of a rating downgrade has diminished as Fitch and Moody’s confirmed BBB- and Baa1 ratings on April 15 and April 17, respectively. ”
“The political outlook remains noisy, but barring major surprises, its impact on currency is likely to remain limited, with marginal asymmetry in favor of a currency-friendly outcome.”
“The main issue that currently leaves us less excited about MXN than before is that we do not see any short-term potential for a clear resolution of the uncertainty surrounding the outlook for Banxico’s policy, and we suspect that as long as this persists, markets will be more inclined to focus on currencies with a higher propensity for hawkish policy changes. ”
“We remain fundamentally constructive on MXN as the pair broke our previous target of 20.00, but are opting for now to move from a one-time target approach to a range approach between 20.00 and the low of. January 2021 around 19.55, with a bias towards a stronger peso.