“MXN is back to 17.75 after sell off in the aftermath of early afternoon earthquake that caused loss of life and building collapses in the capital and southern cities. The economic impact for the economy does not seem to be large to impact the currency which is back to watch FOMC statement for direction. The FOMC is expected to announce the start of the balance sheet reduction and the tone of the statement will determine how much the back end of the curve corrects. It will be interesting how the Mexican curve back end responds how large could be MXN adjustment. So far the market feels that the balance sheet correction has already being priced in and MXN could even rebound if the FOMC comes neutral to market expectations.”
“Today, we have no relevant data in the domestic market and in the US, as mentioned, the highlight is clearly Wednesday’s FOMC decision, which includes an updated SEP and press conference. We expect no change in rates with the focus on commencing balance sheet reduction. The Fed has already outlined fairly detailed plans and we are unlikely to see any major shocks, that doubtless the committee’s intention. On the economy the tone should not change much, optimistic while noting short term risks from recent hurricanes. August CPI should allow them to continue to expect inflation to move up to target in the medium term, despite the data having disappointed in the months before the latest release. Data wise, we see August existing home sales unchanged at 5.44m.”
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