📝See USD/MXN 18.90 As Support: Banorte

Over the week, the USD consolidated around recent levels, marginally extending its YTD decline in the BBDXY (-0.4% w/w), amid stronger relative performance in EMFX vis-à-vis G10 currencies in recent sessions. The reversal in market pricing for Fed rate cuts following the May’s NFP could provide elements for short-term range bound price action in USD indices. Nevertheless, we maintain our view of a cyclical weakening trend going forward. This backdrop continues to offer a supportive backdrop for the Mexican peso, underpinned by compression across various risk premium metrics. Notably, there has been sustained tightening across the entire implied volatility curve, with most MXN tenors trading near year lows. We do not rule out the possibility of the MXN breaking below 19.00, with 18.90 emerging as a more technically significant congestion zone. - Banorte