MXN depreciates, but in line with other LatAm currencies

The Central Bank of Mexico will release its quarterly inflation report on Wednesday. Neither the strength of economic activity nor the underlying inflation dynamics suggest that Banxico is currently behind the curve. 

"Banxico will likely face a dilemma in the months ahead as the US gets closer to its monetary policy normalization process. In the report, it will probably raise its concerns on financial stability issues but, at the same time, highlight the low inflation readings, muted FX pass-through, and fragile economic outlook", says Barclays. 

Although the MXN has depreciated substantially in the past few weeks, it has been in line with other LatAm currencies and, from a valuation perspective, still looks in line with fundamentals. 

"We would like to re-initiate long USD/MXN positions around 15.90, as heavy positioning keeps cleaning", added Barclays.