USD/MXN: The Mexican peso to keep under pressure until end of 2Q 2020 – MUFG

MXN depreciated from 19.769 to 23.408 in the last month while on 20th March, Banxico cut its policy rate by 50 bps to 6.50%. Analysts at MUFG Bank expect the Mexican peso to keep under pressure.

Key quotes

“MXN has depreciated sharply in March amid concerns related to the outbreak of Covid-19 especially in Mexico and in the US, and also somewhat impacted by the drop of oil prices. These 2 factors triggered S&P decision to downgrade Mexican sovereign rating to BBB from BBB+ on the 26th March.”

“An increasing pace of dissemination of Coronavirus in Mexico has all the socio-economic implications (hike of unemployment rate) and it might lead to sharper-than-expected recession and further MXN weakening.” 

“The US economy might show a sharp weakening, thus impacting directly Mexican economic situation and also contributing to MXN weakening at least until 2Q 2020.”