10 Aug 2015
Neutral stance on the Mexican peso – BAML
FXStreet (Edinburgh) - Analysts at BAML have revised lower its stance on the peso, from bullish to neutral.
Key Quotes
“We move the Mexican peso from bullish to neutral”.
“We expect the US dollar strengthening to continue. As relative value trades, we like buying MXN/COP and selling CAD/MXN. The MXN is 7% undervalued in real trade-weighted terms”.
“The correlation between the Mexican peso and oil prices has been declining consistently, possibly due to Mexico turning a net crude importer”.
“However, lower oil prices may negatively affect future FDI inflows into the energy sector”.
“Banxico also considers the exchange rate to be cheap and has stepped up its rule-based intervention, promising to sell US$52mn every day until 29 September. It can extend the program if deemed necessary”.
“In our central scenario we expect Banxico to delay its first hike to 2016 even if the Fed hikes in September”.
“Supporting our call is weak growth momentum, core inflation below the 3% target and an expected gradual hiking cycle by the Fed amid other relevant central banks adding liquidity”.
Key Quotes
“We move the Mexican peso from bullish to neutral”.
“We expect the US dollar strengthening to continue. As relative value trades, we like buying MXN/COP and selling CAD/MXN. The MXN is 7% undervalued in real trade-weighted terms”.
“The correlation between the Mexican peso and oil prices has been declining consistently, possibly due to Mexico turning a net crude importer”.
“However, lower oil prices may negatively affect future FDI inflows into the energy sector”.
“Banxico also considers the exchange rate to be cheap and has stepped up its rule-based intervention, promising to sell US$52mn every day until 29 September. It can extend the program if deemed necessary”.
“In our central scenario we expect Banxico to delay its first hike to 2016 even if the Fed hikes in September”.
“Supporting our call is weak growth momentum, core inflation below the 3% target and an expected gradual hiking cycle by the Fed amid other relevant central banks adding liquidity”.