MXN: Slowdown Already Priced In

The Mexican peso has been hit harder than most regional currencies in recent trading, and with risk aversion still gripping global markets we anticipate further short-term losses against the US dollar. At the time of writing the unit is rapidly closing on the MXN13.00/US$ level, and a break here would imply further losses towards three-month support at MXN13.15/US$. We do not, however, expect a move beyond this level, as consensus growth estimates suggest a second half slowdown is already priced into Mexican assets. As a result, we would need to see economic data in either the US or Mexico surprise significantly to the downside for a break below MXN13.15/US$, suggesting to us that the unit will remain in its medium-term appreciatory trend channel.

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