USD/MXN: We see further weakening – Swissquote

By FXStreet Yann Quelenn, Market Analyst at Swissquote expects the Federal Reserve to remain on hold for the rest of the year regarding interest rates, weakening the USD/MXN pair, which is no good news for Mexico.

Key Quotes:

“The Mexican economy is highly dependent on the United States and its oil revenues. Mexico’s curse is that its central bank needs to carefully follow the Fed’s monetary policy in order to avoid any capital outflow that would result from a narrowing rate differential.”

“It is clear that in the event of a rate hike, Mexico’s economy will be at stake as the country continues to pay the price for its lack of investments in its industry sector, in particular its oil industry. With an out of date infrastructure the country simply does not have a fighting chance to compete in the oil market.”

“Nevertheless, we believe that the health of the US domestic economy is overstated and believe that no further rate hike will happen this year. The dovish stance is clearly retreating and unfortunately for Mexico, we should therefore see further weakening in the USDMXN.”
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Source:: FX Street