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SocGen Revise Rates Forecast, USDMXN Fades With Dollar Weakness

  • USDMXN reached 20.0329 on the FOMC release before resuming a small downtrend that has persisted over the past week since peaking at 20.25. The price action supports the noted bearish technical theme that continues to dominate. A break lower may expose 19.7059, Jun 25 low and 19.5987, the Jun 9 low.
  • **SocGen believes the inflation situation has worsened since the June Banxico meeting. Given the recent releases, they have raised their inflation and reates forecast for 2021.
    • They now expect two more rate hikes of 25bp each in August and September, followed by one each in Q4'21 and Q1'22.
    • They still believe that medium-term tightening prospects are more dependent on financial conditions than the domestic inflation trend.
  • *Today at 1300 Mexico City Time: Mexico Finance Ministry holds conference on 2Q public finances.

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