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USD/MXN: Bad time for Mexico – TDS

The volatility shock to positioning and the impact of the collapse in oil prices come at a very bad time for Mexico, with implications for the currency that are likely to be felt through the duration of 2020, strategists at TD Securities brief. USD/MXN trades at 21.228.

Key quotes

“With the current level in crude, we can expect an approximate adjustment of around 20% in the MXN REER. This suggests the risk that USDMXN drifts above the 22.00 level.”

“We are revising our MXN forecast to reflect the oil price adjustment, corona-based risk aversion, and a risk premium related to the sovereign’s balance sheet. We now forecast a quarterly pattern of 21.00, 21.50, 22.00, and 22.25 at the end of year.” 

“We remain bearish on MXN into 2021 and see further adjustment likely towards 23.00.”


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