MXN: Close call on a Banxico cut – ING
|There is a lot of 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 it started its easing cycle in March, and economists are split down the middle on whether it will cut, ING’s FX strategist Chris Turner notes.
USD/MXN to trade over 20.00 again
“Those in favour of a cut argue that real interest rates do not need to be this high anymore and that Banxico can resume an orderly softening of restrictive policy; those against a cut argue that the peso has been front and centre of the carry trade unwind and that a cut could prompt USD/MXN to trade over 20.00 again, destabilising local asset markets.”
“We do not have a strong view here, but perhaps a hold under the next meeting on 26 September – a week after the Fed decision – might prove appealing to Banxico. If so, and assuming there is some stability in global risk assets and USD/JPY, USD/MXN could drop into the 18.85/19.00 area.”
“However, we are fearful of Mexican politics again weighing on the peso in September when the new parliament will discuss constitutional reforms. We struggle to see USD/MXN trading sustainably below 18.50 over the coming months.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.