This week, as the market reprices the US election, MXN & CLP were the outliers of Latam currencies with decent outflows seen from systematic names and macro-HF.
On MXN yesterday there was a massive tightening in the funding tenors where TN moved all the way up to 250bp and pushed the whole front of the curve higher.
USDMXN tested 20.00 psychological level (20.0290 was the highest print) but the pair found good offers above this level. However, further weakness is a risk as we head into the US election.
But surprisingly, in COP & BRL we have not seen many outflows this week, even though Latam FX tends to underperform going into the US elections.
Locally this week, President Sheinbaum stated that the goal of judicial reform is not for the executive branch to control judges (El Economista, Oct. 15). She also announced investment commitments in the amount of $20 bn from national and U.S. firms. The government of Mexico promised to provide a stable investment environment and comply with the rules of the USMCA trade agreement (El Financiero, Oct. 15). Meanwhile, the ruling party leader, Monreal, announced that they are working with the Senate on a package of at least 10 secondary laws related to the recently approved judicial reform (El Economista, Oct.15).
Today, USDMXN has already retraced 136bp from the high and the rest of USDLatam retraced by the end of the session in BRL/COP/PEN, so we should expect to see USDBRL and USDCOP to open lower from here.
COP – COP was rather choppy throughout the day, but overall outperformed its LatAm peers against the dollar in today’s NY session. USDCOP traded -0.17% on the day. Flow-wise, our traders mainly saw local and offshore RMs outflows while there were corporate inflows and mixed HFs activity in the NY session. RM outflows may be an anticipation of tomorrow’s Economic Activity prints, with consensus expecting a +1.6% YoY print vs. 3.6% prior. Additionally, RM outflows may have been an anticipation ahead of the Lower House vote this afternoon (17:00 EST) to approve labor reform policies in the country.