USD/MXN: Waiting for better entry points – CIBC

Luis Hurtado from CIBC Capital Markets recommends to wait for better entry levels on the USD/MXN pair while he sees the Mexican peso appreciating at the end of the second quarter.

Key quotes

“The combination of warnings of an oil inventory surge, a decline in demand for crude oil this year, and Fitch’s downgrading of the country’s credit outlook to BBB-, has put the brakes on the positive sentiment surrounding Mexican assets more recently.” 

“We expect MXN volatility to remain high, given the steep deterioration in growth prospects for this year, ongoing political risks, and a likely acceleration in the monetary policy easing cycle.” 

“While we expect the MXN to regain ground towards the end of Q2 alongside a stabilization of the virus outbreak globally, we suggest waiting for better entry points (25-25.5) before dipping into short USD/MXN positions.”