There is much focus today on whether Banxico will cut its high policy rate to 10.75% from 11.00% when it meets tonight. It has been on hold since its easing cycle began in March, and economists are split down the middle on whether it will cut, notes Chris Turnerstrategist of ING FX.
USD/MXN to trade above 20.00 again
“Those in favor of a cut argue that real interest rates no longer need to be so high and that Banxico can resume an orderly easing of restrictive policy; those against a cut argue that the peso has been at the center of the unravelling of the carry trade and that a cut could lead to USD/MXN trading above 20.00 again, destabilizing local asset markets.”
“We don’t have a strong view here, but perhaps a wait until the next meeting on September 26 – a week after the Fed decision – could prove attractive for Banxico. If so, and assuming there is some stability in global risk assets and USD/JPY, USD/MXN could fall into the 18.85/19.00 area.”
“However, we fear that Mexican politics will weigh on the peso again in September when the new parliament discusses constitutional reforms. We struggle to see USD/MXN trading sustainably below 18.50 in the coming months.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
