🐍🦅Wider Policy Spread to Push Peso Above 19.5: Cable FX Macro

• The current Fed-Banxico spread stands at 150bps, however, chatter for a 50bps rate hike in December was ignited after Fed's Waller comments. If materialized, the differential would fall to 100bps which is tight when compared to the historical average of 500bps.

• A diminished risk premia would pressure investors to exit MXN long positions and carry trades into more attractive assets. The trade is not recent, USD/MXN has been rallying since the Fed decided to hike rates in September. A Banxico rate cut and the odds of 50bps tightening (wether December or 2x 25bps in December and January) are likely to push the spot above 19.50.