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ING Expect Banxico To Signal Future Cuts, Potentially Weighing On Peso

MEXICO
  • With Mexican growth coming in on the strong side and core inflation flattening out, Banxico is seen in no hurry to move again independently of the Fed. And interest rate swap markets price both Fed and Banxico easing cycles very similarly this year.
  • ING think Banxico may well choose to keep its head down today given the proximity of the Mexican presidential election on 2 June. And given that the continuity candidate, Claudia Sheinbaum, is so far ahead in the opinion polls, they do not see the elections as proving much of a risk to the peso.
  • However, ING do think the inflation-adjusted, real peso is very strong, and they suspect officials would not want USDMXN below the 16.50 area again. As such, they expect Banxico to offer clues today about a further cut in June, which could prove peso negative. Their baseline view continues to see MXN outperforming the steep forward curve – but not delivering the kind of nominal appreciation seen over recent years.
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