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USDMXN Spikes to 20.65 With Consistent 25bp Hike and One Dissention

MEXICO
  • On growth: "Preliminary information indicates that the Mexican economy contracted during the third quarter, although it is expected to resume its recovery starting in the fourth quarter."
  • On inflation: "The balance of risks for the trajectory of inflation within the forecast horizon deteriorated and remains biased to the upside. The shocks that have increased inflation are largely considered to be transitory. Nevertheless, the horizon in which they could affect it is unknown, and they have involved a wide range of products, while being of considerable magnitude. This poses greater risks to the price formation process and to inflation expectations."

  • The board describe the transitory horizon as "unknown" and the shocks "of considerable magnitude" which are both new.
  • Despite pointing towards the increasing pressures and potentially alluding to there being no plans to pause the current policy tightening schedule, the 25bp hike with Esquivel's dissention are interpreted as dovish at the margin.
  • USDMXN up from 20.50 to 20.65 and closing in on the overnight highs of 20.6888.
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