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⚠️Mexican Peso Carry/Vol Ratio Halved On Local Risks: Cable FX Macro

  • Whether the recent election results will change Mexico structurally or not is yet to be seen, however, financial markets don't usually wait and move on expectations. The latter is evident this week as 1w USD/MXN implied volatility rises beyond 30.0%, this is a net 19.5vol spike over the last five days!

  • Such increase has left the peso in a disadvantaged position, the MXN started the year with a carry/vol ratio close to 1.0, it has been halved after the sharp increase in implieds

  • Pairing funding currencies to BRL, INR and KRW may prove as better strategies as the peso carry/vol is not attractive anymore. The structure shows readings above 15.0% into the 4m tenor, and the U.S. election is likely to source further risks



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