Morgan Stanley Sees Chinese Auto Market Recovery Gaining Momentum in Late Summer 
BOJ Hawk Signals Faster Interest Rate Hikes Amid Inflation Risks 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
China's Refining Industry Faces Major Shakeup Amid Challenges 
RBA Minutes Signal Australia Central Bank Remains Ready to Raise Interest Rates if Inflation Persists 
Malaysia Central Bank Moves to Support Ringgit Amid Foreign Fund Outflows 
New Zealand Unemployment and Inflation Debate Intensifies Ahead of 2026 Election 
Open-Source AI Models Gain Ground as Enterprises Seek Lower-Cost Alternatives, Citi Says 
ECB Set to Raise Interest Rates as Energy Shock Fuels Eurozone Inflation Concerns 
BOJ Raises Interest Rates to 1% as Inflation Pressures Persist 
Energy Sector Outlook 2025: AI's Role and Market Dynamics 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
South Korea Signals Possible Interest Rate Hike as Inflation Remains Elevated 
A Korean Family Spent 34 Years Hoarding Chinese Tea. Now They're Putting It on the Blockchain. 
The peso has outperformed in the recent past as EMFX rallied across the board. Several factors contributed to this outperformance: Mexico’s high real rates relative to peers, appealing short and medium-term valuations and the significant room to increase MXN exposure given the very low level of investor positioning relative to history.
In addition, the central bank’s concern around financial stability risks means that while rate cuts will likely continue, Banxico seems more keen than peers to keep a real yield buffer in place. This should matter to investors given the importance of relative EM real yields during this COVID-19 crisis. In summary, we think the outperformance of the peso should continue, albeit a more moderate pace than this past week.
OTC Updates and Trading Strategies:
As stated in our previous posts, the positively skewed IVs of USDMXN of 3m tenors have delivered as expected and have still been indicating upside risks, while IV remains on lower side and it is perceived to be conducive for options writers.
Considering the current MXN skew setup and the receding risks for MXN spot we are open to taking the gamma risk in order to more efficiently reap the extra OTM vs ATM premium on MXN put side. 1*1.5 MXN ratio put vol spreads have shown strong and almost equivalent systematic returns for USDMXN and EURMXN over last few years.
3M USDMXN ATM/25D 1*1.5 vol ratio call spread vs 22.80/25.77 indicative (spot reference: 21.731 levels).
On the other hand, activated shorts in EUR vs MXN in cash at 25.08. Marked at 2.04%. Stop 26.0. Courtesy: Sentry & JPM
