USD/MXN: Mexican Peso could erase last week's gain if risk sentiment sours
- MXN, last week's top performer, remains vulnerable to renewed risk-off in stocks, according to Goldman Sachs.
- USD/MXN is gaining altitude in Asia amid losses in the US stock futures.
Mexican Peso (MXN) could give up some of the gains seen last week if the risk assets come under pressure, according to analysts at Goldman Sachs.
The oversold MXN picked up a bid and rose by more than 4% last week, pushing USD/MXN lower from levels above 25 to 22.83, as the global equities witnessed a recovery rally, possibly on the back of the US Federal Reserve's decision to launch an open-ended asset purchase program and the US Senate's approval of the $2 trillion fiscal stimulus program.
The bearish momentum in oil also weakened with West Texas Intermediate trading well within the preceding week's high and low.
However, the global equities may not be out of the woods yet, as, in the West, the economic fallout from the coronavirus outbreak is only just beginning, according to Goldman Sachs analysts.
"Without medical breakthroughs of some kind, the next few weeks could be challenging for markets as we price in a deep global recession," Goldman Sachs strategist Zach Pandl noted, according to ZeroHedge.
As a result, global equities could again feel the pull of gravity, pushing the MXN lower. The USD/MXN pair is currently trading near 23.35, representing a 1.8% rise on the day.
The MXN is flashing red, as the futures on the S&P 500 are reporting a more than 1% drop on the day. Japan's Nikkei index, the Shanghai Composite and South Korea's Kospi index are also trading in the negative territory.