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Mid-Month Inflation Data Due, USDMXN Edging Higher

MEXICO
  • Inflation likely reached 8.12% Y/y in the first two weeks of July, slightly above the 8.09% print in the second half of June, according to the surveyed median estimate on Bloomberg. Data is due at 1200BST/0700ET.
  • Higher core inflation and non-processed food inflation should lead the uptick, with lower energy and government regulated inflation partially offsetting the advance.
  • Base effects and government subsidies should help keep inflation more stable in July. Sequential data and core metrics may point to ongoing upward pressure on prices from supply shocks, increasing costs and price indexation.
  • Annual core inflation is expected to have risen from 7.52% to 7.55%. Goods inflation is likely to extend its uptrend. Services inflation should be practically unchanged.
    • Barring any dramatic surprises, Banxico look set to hike again by 75bps to 8.5%, with the latest central bank rhetoric indicating the board “will evaluate taking the same forceful measures if conditions so require”. The next Banxico decision is scheduled for August 11.
  • The pullback in USDMXN from last week’s high above 21.00 is still considered to be technically, corrective. Having held above the 50-day EMA earlier this week, the pair has been gradually edging higher. This average now intersects at 20.3050 and remains the notable support. A clear breach of the 50-day EMA would signal scope for a deeper pullback, towards the 20.00 handle. For bulls, the trigger for a resumption of gains is 21.0535, the Jul 14 high.
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  • Inflation likely reached 8.12% Y/y in the first two weeks of July, slightly above the 8.09% print in the second half of June, according to the surveyed median estimate on Bloomberg. Data is due at 1200BST/0700ET.
  • Higher core inflation and non-processed food inflation should lead the uptick, with lower energy and government regulated inflation partially offsetting the advance.
  • Base effects and government subsidies should help keep inflation more stable in July. Sequential data and core metrics may point to ongoing upward pressure on prices from supply shocks, increasing costs and price indexation.
  • Annual core inflation is expected to have risen from 7.52% to 7.55%. Goods inflation is likely to extend its uptrend. Services inflation should be practically unchanged.
    • Barring any dramatic surprises, Banxico look set to hike again by 75bps to 8.5%, with the latest central bank rhetoric indicating the board “will evaluate taking the same forceful measures if conditions so require”. The next Banxico decision is scheduled for August 11.
  • The pullback in USDMXN from last week’s high above 21.00 is still considered to be technically, corrective. Having held above the 50-day EMA earlier this week, the pair has been gradually edging higher. This average now intersects at 20.3050 and remains the notable support. A clear breach of the 50-day EMA would signal scope for a deeper pullback, towards the 20.00 handle. For bulls, the trigger for a resumption of gains is 21.0535, the Jul 14 high.