No reasons for Banxico to have a hawkish bias

Banxico's decision next week can be weighed on by Mexican inflation at new all-time lows. Despite recent weakness in EM currencies, a little evidence of a broad FX pass-through is found and shows that Banxico has enough arguments to soften its language. 

"Economic growth below potential and a subdued optimism around reforms coupled with well-anchored inflation expectations will likely keep Banxico in check in the next few months", says Barclays. 

Any decision to hike in the months ahead will be strictly dependent on the Fed's action and MXN developments. In addition, Brazil's developments and China's growth concerns will continue exerting some pressure in the MXN. 

"USDMXN might continue its upward trend towards 16.50, but the risks of a pullback in the short-term are to be acknowledged, given how stretched the positioning is. 15.90-16.00 should serve as a good entry point to re-establish/add long USDMXN positions", added Barclays.