Last few months have been tough for the MXN as it has weakened 10 % versus USD during the EM sell-off, but in the last two weeks USDMXN has moved over 4 % lower, notes the research team at Nordea Markets.
Key Quotes
“The MXN stays inside the green area in June, recording a risk level of 11 % (12 % in May). According to the model, the biggest risk arises from the credit growth while inflation risk moved from red to yellow. Inflation has been easing since January and will likely continue to do so as FX Pass through from the weak MXN has not yet materialized. In the case of another MXN depreciation pressure, we expect the Banxico to stand ready with rate hikes.”
“NAFTA negotiations worries will continue and president-elect Andrés López Obrador has earlier expressed his dissatisfaction towards president Trump. Hence, we judge the real risks for the peso to be slightly higher than indicated by the model. With that said, the new president will not take office before 1 December limiting the actual change in the government administration this year.”
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