USD/MXN unstoppable towards 22.00; Where is Banxico?
Donald J. Trump serves today an intro speech that has market participants wondering, how better or wild the economy can get. Meanwhile, USD/MXN has no doubts that things aren't getting better for the Mexican peso anytime soon as the exotic clocks another fresh new high on the 21.95 handle.
At the time of writing, spot banks +0.1418 gain or +0.65% while it keeps moving away from the previous 21.73 low.
Banxico’s mediocre tactic
Peter Rosenstreich, Head of Market Strategy at Swissquote, offered his views on the Mexican Peso, “Political uncertainty continues to drive MXN lower. Despite Banxico's FX intervention, selling $2bn worth of USD on 5th and 6th ($165bn in FX reserves) with the goal of “providing liquidity and reducing volatility”, USDMXN has broken recent highs, touching 21.84. Yesterday’s move was triggered by the mere anticipation of President-elect Trump’s press conference, which is generating massive outflows from MXN into USD. Trump’s nomination of anti-trade personalities such as Wilder Ross and Peter Navarro has only hardened expectations for a protectionist shift.
Rosenstreich concluded, “While the Mexican economic outlook has deteriorated and the risk of a trade war with the US has increased, domestic economic data remains decent. Today’s expected release of industrial production should indicate a recovery of 0.5% from -1.5% fall in the prior read. Yet, ironically the fate of the MXN is at the mercy of Trump’s Twitter feed. Banxico will remain vigilant but there is little prospect of action, redirecting the market’s bias. With the exception of MXN, CNY, and TRY, EM currencies are enjoying decent demand with volatility broadly dropping, indicating that should Trump change his language on MXN we could get a significant recovery kick in MXN.”
USD/MXN sidelined at all-time highs ahead of Trump