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USD/MXN expected to decline to 16.35 by quarter-end – TDS

FXStreet (Córdoba) - According to Cristian Maggio, Head of Emerging Markets Strategy at TD Securities the Mexican peso could rise 2.2% against the US dollar during the fourth quarter. He added that Mexico will growth faster and more sustainable that most Latin American countries.

Key Quotes:

“Rest assured that Banxico has no urge to tighten monetary policy until either inflation forces them to (and we’re far from there) or the market does (which is also unlikely until the Fed or the US economy provide credible signs of imminent hikes coming). In the absence of this, don’t expect any change in rates there.”

“The Mexican curve offers good value and attractive roll down being one of the steepest major EM curves. 1yr rates offer carry+roll of 4bp+21bp; carry may not be that attractive, I get that, but if the curves stays still or moves lower over the next 3m as we expect, investors will still enjoy +7bp/month roll down."

We expect USDMXN at 16.35 (peso 2.2% stronger) by quarter-end. Why is that? Well, the economy may be growing at slower pace that most (including ourselves) had expected this year, but it’s growing and accelerating while most Latam neighbours exhibit a down trajectory. Reforms have been implemented, remember the excitement? No results so far? The low-hanging fruits have already been picked, but the juicier ones will be ripe only in the future. When these start producing results, Mexico will exhibit a faster and more sustainable growth model than most Latam peers.”

EUR/JPY bears taking back control

EUR/JPY is currently trading at 134.77 with a high of 135.72 and a low of 134.41.
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