USD/MXN: Driven by politics - BBH

Analysts at BBH note that USD/MXN shot up late yesterday on comments by Mexican Economy Minister Guajardo.  

Key Quotes

“He noted that an obsession with balanced trade is “a shot in the foot.”  He added that Mexico refuses to negotiate under threat and that it needs to prepare for alternatives.  We think markets got a little complacent about Mexico risks.  No, we're not going back to 22 but the peso seems too rich near 17.50.  Perhaps something between 18.00-18.50 is fair value, at least for now.  Note that USD/MXN couldn't move above the 18.04 area back in early August.  That level is the 62% retracement objective of the July drop, and a break is needed to set up a test of the July 5 high near 18.4050.”