USD/MXN: Peso’s high risk-adjusted returns will remain in demand – ING

FXStreet Insights Team FXStreet

USD/MXN has virtually unwound the entirety of the 2020/22 pandemic and energy supply shock to trade back close to the 18.50 lows. Economists at ING maintain a bullish bias on the Mexican Peso.

Peso looks good

“The very credible fiscal (Mexico 5-year CDS at 120bp vs. 233bp for Brazil) and monetary (real rates are +2%) situation are strong drivers for MXN demand.”

“Banxico continues to match the Fed in its tightening cycle, meaning that the policy rate will be taken close to 11% by the end of the quarter. Not bad with inflation running at 8.5%. And as the market takes a greater interest in carry, 3m MXN implied yields at 11.40% provided very strong risk-adjusted carry.”

“The Banamex sale or high US inflation pose the biggest threats.”

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FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

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