A mix of good growth and Fed cuts is tactically bearish for USD/MXN in the very short run – TDS

Market news

30 January 2024

A mix of good growth and Fed cuts is tactically bearish for USD/MXN in the very short run – TDS

Economists at TD Securities like the Mexican Peso (MXN) and expect the USD/MXN pair to move lower.

The USD is overbought and expensive

After the recent correction higher in the USD, it does not look as cheap or oversold. It now looks more balanced versus not just macro drivers but also our positioning indicators. This means that the USD's move higher should run out of steam soon, and risk-reward tilts towards fading the USD strength.

Tactically, we like USD/MXN lower, reflecting a powerful mix of disinflation and good US data, which is a sweet spot for MXN until we have to worry about elections and cuts by Banxico.

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