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USDMXN Rallies On Banxico Commentary, Stronger Greenback

MEXICO
  • In its latest quarterly inflation, Banxico did not change the inflation forecasts but did revise up both 2023 and 2024 growth projections to 3.3% and 3.0% respectively. While this was broadly in line with expectations, the central bank’s commentary in the press conference did prompt some market moves. Governor Rodriguez, along with deputy governors Heath and Mejia all said that a rate cut in Q1 could be discussed.
  • The comments were broadly in line with prior comments from Heath who earlier this week said that if inflation continues to drop, especially core inflation, an 'adjustment' to interest rate could come by February or March. In a radio interview, Heath highlighted that any early interest rate cuts should be seen as "slight adjustments," not the start of a rate-lowering cycle. Unsurprisingly, deputy governor Espinosa warned that inflation risks were growing.
  • Overall, the comments weighed on the peso and given the overnight greenback strength, USDMXN has risen 0.65% on the session. Price action has seen the pair narrow the gap with initial resistance is at the 50-day EMA, which intersects around 17.50.
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