USD/MXN likely to head higher in coming months

In Mexico, a tight fiscal glance, lower inflation and credible monetary policy signal that stable foreign ownership of bonds some scope for long-term rates to decrease. 

Mexico is seen as one of the countries which have strong fundamentals. These solid fundamentals can support it to direct the headwinds that EM countries are facing.

Long term inflation anticipations are well positioned and growth outlook is subdued alongside a minimal FX pass through to the inflation, indicating that Mexican central bank is likely to bear FX weakness and would not be hiking to the amount that is expected by markets.

"Although we anticipate USD/MXN to head higher and recommend FX hedging long Mbono positions, we expect it to outperform vulnerable EM FX names such as the BRL", says Barclays in a research note.