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Strategists at Credit Suisse switch to targeting a USD/MXN 19.55-20.00 range, vs the previous 20.00 target. The main reason is that they see Banxico policy uncertainty partially offsetting positive macro factors.

Balance of payments data continue to show a very supportive picture for the peso

“The balance of payments continues to show supportive demand spillover from US stimulus via the remittances and goods trade channels, while foreign direct investment remains supported and legal challenges via the USMCA resolution mechanism channel have so far been benign. Also, it’s worth noting that the threat of a rating downgrade has decreased with both Fitch and Moody’s affirming ratings of BBB- and Baa1 on 15 Apr and on 17 Apr respectively.”  

“The political outlook remains noisy, but barring large surprises is likely to remain of limited impact on FX, with a marginal asymmetry in favour of an FX-supportive outcome.”

“The main issue that currently leaves us less enthusiastic about MXN than before is that we do not see near-term potential for a clear resolution to uncertainty around the Banxico policy outlook, and we suspect that as long as this persists, markets will be more inclined to focus on currencies with higher propensity to hawkish policy shifts.”  

“We remain fundamentally constructive on MXN, with the pair having breached our previous 20.00 target, but opt for the time being to shift from a point target approach to a range based one between 20.00 and the January 2021 lows around 19.55, with a bias towards a stronger peso.”