Wall Street Analysts Weigh in on Latest NFP Data 
Trump’s Iran Strategy: What Has Been Achieved After Three Months of Conflict? 
RBI Holds Interest Rates at 5.25%, Cuts India Growth Forecast Amid Rising Global Risks 
Gold Tumbles Below $4,400 on NFP Shock: Fed Easing Bets Crater, Sell on Rallies to $4,300 
BOJ Raises Interest Rates to 31-Year High, Signals Strong Focus on Inflation Risks 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
Indonesia Surprises Markets with Interest Rate Cut Amid Currency Pressure 
Goldman Sachs Sees Fed Holding Interest Rates Steady Until 2027 
RBA Expected to Hold Interest Rates at 4.35% as Markets Watch AUD/USD and ASX 200 
ECB Set to Raise Interest Rates as Energy Shock Fuels Eurozone Inflation Concerns 
US Gas Market Poised for Supercycle: Bernstein Analysts 
Jerome Powell Warns Against Politicizing the Federal Reserve, Defends Democratic Institutions 
The peso has outperformed in the recent past as EMFX rallied across the board. Several factors contributed to this outperformance: Mexico’s high real rates relative to peers, appealing short and medium-term valuations and the significant room to increase MXN exposure given the very low level of investor positioning relative to history.
In addition, the central bank’s concern around financial stability risks means that while rate cuts will likely continue, Banxico seems more keen than peers to keep a real yield buffer in place. This should matter to investors given the importance of relative EM real yields during this COVID-19 crisis. In summary, we think the outperformance of the peso should continue, albeit a more moderate pace than this past week.
OTC Updates and Trading Strategies:
As stated in our previous posts, the positively skewed IVs of USDMXN of 3m tenors have delivered as expected and have still been indicating upside risks, while IV remains on lower side and it is perceived to be conducive for options writers.
Considering the current MXN skew setup and the receding risks for MXN spot we are open to taking the gamma risk in order to more efficiently reap the extra OTM vs ATM premium on MXN put side. 1*1.5 MXN ratio put vol spreads have shown strong and almost equivalent systematic returns for USDMXN and EURMXN over last few years.
3M USDMXN ATM/25D 1*1.5 vol ratio call spread vs 22.80/25.77 indicative (spot reference: 21.731 levels).
On the other hand, activated shorts in EUR vs MXN in cash at 25.08. Marked at 2.04%. Stop 26.0. Courtesy: Sentry & JPM
