The Mexican peso keeps the bullish stance – BAML

FXStreet (Edinburgh) – In the opinion of analysts at BAML, the perspective for the Mexican peso remains positive.

Key Quotes

“We stay long the Mexican peso. We recommend short USD/MXN and short EUR/MXN via options and short PEN/MXN and long MXN/COP via forwards”.

“The MXN is 2% undervalued in real trade-weighted terms according to Compass. It has also lagged oil prices significantly this year – oil is up 35% since mid-January but the peso is down 5% since”.

Banxico also considers the exchange rate to be cheap and has stepped up its rule-based intervention, promising to sell US$52mn every day until 29 September. It can extend the program if deemed necessary”.

“We expect Banxico to keep rates steady until 2016, even if the Fed hikes in September provided three conditions are met: 1) the Fed’s hiking cycle is gradual; 2) fiscal policy consolidates in a credible manner; and 3) the MXN does not depreciate enough to alter inflation expectations”.

In the opinion of analysts at BAML, the perspective for the Mexican peso remains positive…

(Market News Provided by FXstreet)