Mexico: Peso to continue to underperform – BBH

By FXStreet FXStreet (Córdoba) – Analysts from Brown Brother Harriman, note that despite the fundamentals of the Mexican economy, the peso (MXN) continues to underperform even during the recent bounce in Emerging Markets (EM).

Key Quotes:

“Despite having decent fundamentals, the Mexican peso continues to underperform. Oil prices and general EM sentiment will likely remain the most important drivers for the peso and in that regard, the outlook remains cloudy.”

“The Mexican economy remains sluggish, dragged down in part by low oil prices”

“Petroleum exports remain weak, but more worrisome is the fact that non-petroleum shipments have weakened too recently (…) The correlation between oil prices and MXN has strengthened.”

“The peso has generally underperformed within EM, and this should continue. In 2015, MXN lost -14% vs. USD. This compares to the worst performers ARS (-35%), BRK (-33%), ZAR (-25%), COP (-25%), RUB (-20%), and TRY (-20%). So far this year, MXN is down -7.1% YTD, behind only RUB (-7.2% YTD) and ARS (-8.4% YTD).”

“From a shorter-term viewpoint of this recent EM bounce, MXN has disappointed once again. While other EM currencies were retracing 50-62% of their December-January drops, the peso only got as far as its 38% retracement …read more

Source:: FX Street