USD/MXN to target the 21.50 level – Credit Suisse

USD/MXN trades today at 22.76, up 0.55% on day. Portfolio outflows are concerning but not crucial in the opinion of analysts at Credit Suisse who have the Mexican peso as their favorite EM proxy for pro-risk views.

Key quotes

“High carry and a cautious central bank continue to provide reasons for MXN to trade as a risk proxy, even as the domestic growth outlook turns increasingly challenging.”

“Domestic politics are likely to continue to have limited impact on FX. Upcoming US elections and USMCA’s standing as President Trump’s first term achievement suggests that the relationship with the US will remain benign and MXN-supportive.” 

“The outflows from government debt continue and remain a source of long-term concern. In the near-term however, Mexico’s fiscal and external balances remain manageable, suggesting that funding concerns are unlikely to prove FX-relevant for the time being.” 

“We target 21.50 in USD/MXN, and look to fade spikes above 23.00.”