USD/MXN: Not looking for reversal until bottom of Q3 target range at 16.50 is reached – Credit Suisse

Economists at Credit Suisse stay constructive BRL and MXN and would not look for reversals in either before the bottom of respective USD target ranges are tested, at 4.58 and 16.50 respectively.

Carry remains a key and unique point of attraction for BRL and MXN

Carry remains a key and unique point of attraction for BRL and MXN, and with markets biased towards dovish policy outcomes, our view that local central banks are likely to skew cautious and not cut aggressively ahead of the Fed leaves us looking for resilience in both currencies. 

We hold end-Q3 targets of 16.70 in USD/MXN and 4.70 in USD/BRL, and will not consider positioning for reversals in either pair until the bottom end of our Q3 target ranges are conclusively reached, respectively at 16.50 and at 4.58.