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MEXICO: Peso Consolidates Renewed Strength, 50BP Banxico Cut Most Likely

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • USDMXN has spent the overnight session oscillating around 20.40, consolidating the sharp reversal seen on Monday, that saw the pair reverse ~4.5% from the prior highs around 21.30.
  • While many analysts had assumed President Sheinbaum’s daily press conference would be used to announce retaliatory tariffs, news of the accords with the US administration provided Mexican assets with a substantial reprieve. While tariff implementation has only been pushed back by a month, the working groups on trade, security and migration have provided a much more optimistic backdrop and should foster hopes of a broader trade agreement ahead. Trump later commented that “we will have a big negotiation with Mexico”.
  • For USDMXN, short-term positioning likely leaves the downside vulnerable at this juncture, and the breach of the 50-day EMA might bolster downside momentum. Below here, key support has been defined at 20.1343, the Jan 24 low.
  • Peso stability means consensus expectations are now firmly for a 50bp cut from the Banxico committee, who have previously guided that an acceleration in the easing pace could be possible. This will also be the first meeting for newly appointed Gabriel Cuadra who replaces the hawkish Espinosa. Cuadra is an economist with more than 20 years at Banxico.
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  • USDMXN has spent the overnight session oscillating around 20.40, consolidating the sharp reversal seen on Monday, that saw the pair reverse ~4.5% from the prior highs around 21.30.
  • While many analysts had assumed President Sheinbaum’s daily press conference would be used to announce retaliatory tariffs, news of the accords with the US administration provided Mexican assets with a substantial reprieve. While tariff implementation has only been pushed back by a month, the working groups on trade, security and migration have provided a much more optimistic backdrop and should foster hopes of a broader trade agreement ahead. Trump later commented that “we will have a big negotiation with Mexico”.
  • For USDMXN, short-term positioning likely leaves the downside vulnerable at this juncture, and the breach of the 50-day EMA might bolster downside momentum. Below here, key support has been defined at 20.1343, the Jan 24 low.
  • Peso stability means consensus expectations are now firmly for a 50bp cut from the Banxico committee, who have previously guided that an acceleration in the easing pace could be possible. This will also be the first meeting for newly appointed Gabriel Cuadra who replaces the hawkish Espinosa. Cuadra is an economist with more than 20 years at Banxico.