MEXICAN PESO OUTLOOK:
- USD/MXN[1] exploded higher last week on delta-variant worries, but has pulled back in the last couple of days amid a rebound in risk appetite
- This week, the Fed’s Jackson Hole Symposium will be the center of attention
- If the Fed signals a tapering announcement will not come in the next couple of months, but towards the end of the year, US Treasury yields could stay depressed, boosting EMFX
FX Week Ahead - Top 5 Events: Mexico GDP; US Durable Goods Orders; ECB Meeting Minutes; US Michigan Confidence; Powell’s Jackson Hole Speech[2]
Last week, USD[3]/MXN exploded higher, surpassing its 200-day moving average and rising to its highest level in four weeks (~20.45) amid widespread risk aversion on delta-variant concerns as more countries began to re-impose lockdowns to contain the spread of virus. With the implementation of containment measures in large economies such as China, the global reflation story weakened, temporarily weighing on the EMFX.
This week, however, USD/MXN has pulled back as risk appetite appears to have rebounded following the FDA's decision to fully approve the Pfizer-BioNTech's coronavirus vaccine for people over the age of 16. Investors believe that full approval will encourage companies, schools and local governments to mandate vaccines to compel skeptical individuals to get the jab. With more people inoculated, the virus nightmare may end sooner, an outcome that will restore consumer confidence [4]and boost economic activity. Generally speaking, any pickup in U.S. growth can be seen as a bullish catalyst for the Mexican peso, as Mexico sends close to 80% of its exports to its northern neighbor.
Most read: USD/CAD Breakout Reverses, Key Loonie Levels to Keep on Eye on[5]
Putting the pandemic situation aside for a moment, the main event to
