MAS Holds Monetary Policy Steady as Strong Growth Raises Inflation Risks 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
South Africa Eyes ECB Repo Lines as Inflation Eases and Rate Cuts Loom 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays 
Gold Prices Slide as Rate Cut Prospects Diminish; Copper Gains on China Stimulus Hopes 
Fed Governor Lisa Cook Warns Inflation Risks Remain as Rates Stay Steady 
China's Refining Industry Faces Major Shakeup Amid Challenges 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
RBA Raises Interest Rates by 25 Basis Points as Inflation Pressures Persist 
Mexico's Undervalued Equity Market Offers Long-Term Investment Potential 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
China Extends Gold Buying Streak as Reserves Surge Despite Volatile Prices 
Urban studies: Doing research when every city is different 
BOJ Holds Interest Rates Steady, Upgrades Growth and Inflation Outlook for Japan 
In mid-August, the Mexican central bank somewhat surprisingly for many lowered its key interest rate. The accompanying statement contained no indications as to how monetary policy would continue. The minutes of the meeting show that the central bankers agree that there are downside risks with regard to the economy.
On the other hand, there is no agreement on inflation risks. The forecast uncertainty is regarded as quite high. Not everyone sees the risk for inflation as pointing downwards. In addition, the central bank expressed surprise that inflation expectations have remained stable and have not declined in line with the weak economy and declining inflation rates.
In this context, the focus is on today's inflation data release for the month of August. If this continues to weaken, this would argue for a further rate cut this month.
However, if it surprises significantly upwards, the sceptics in the board could gain the upper hand. External factors are currently dominating the Mexican peso. But if the central bank becomes increasingly dovish, the peso is likely to become more susceptible to risk-off phases.
Technically, USDMXN major uptrend remains intact despite some minor corrections (refer above technical chart). We maintain MXN projections of 22 for the end- 2019 and our long USD recommendations in options. The peso’s high carry is likely the reason for MXN’s outperformance this year among EMFX peers. Yet, extended MXN longs positions, BoP weakness, political uncertainty and some fiscal deterioration in our view make MXN more likely to weaken for the rest of the year.
Of late, MXN seemed to be extending recovery threatening upper bound of the recent range.
But please be noted that the 3m USDMXN implied volatility skews signal continued upside risks. The previous massive sell-off of Mexican peso caused a vol surface dislocation, nudging skews to the highest since the 2016 US Presidential elections. Delta hedged 1*1.5 ratio call spreads exploit the dislocation while also having historically offered a superb performance. +1Y/-3M calendars of risk reversals take advantage of the lagging back-end vs front-end implied skews, spot reference: 19.50 levels. Courtesy: Commerzbank, Sentry & Tradingview.com
