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MEXICO: USDMXN Steady As Tariff Talks Remain In The Spotlight This Week

MEXICO
EM BulletMexicoBulletEmerging Market NewsNorth America
  • USDMXN is little changed at the start of a week where focus will be on talks ahead of the March 4 deadline for the US to impose 25% tariffs on all Mexican imports into the US. Last week, Economy Minister Ebrard met with US Commerce Secretary Lutnick, and although no important information was released, there appears to be some optimism that negotiations will see tariffs avoided.
    • Indeed, HSBC thinks that the recent US-Mexico talks to assess efforts on immigration and security-related issues could be enough to further postpone the potential implementation of some tariffs.
    • However, they believe that the uncertainty could weigh on growth, which along with disinflation will make room for rate cuts. With Banxico adopting a more dovish tone, highlighted in last week’s QIR and minutes, they see another 50bp rate cut in March, followed by a total of 100bp in rate cuts afterwards, in clips of 25bp.
    • To recap, we noted last week that several other analysts see a further 50bp cut in March, including Goldman Sachs, SocGen and Itaú, as Banxico front-loads its rate normalisation cycle. JP Morgan also sees another 50bp move at the May meeting, before slowing the pace back to 25bp.
    • Today, bi-weekly CPI data are unlikely to change the rate outlook, with a relatively benign core inflation print expected for the first half of February.
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  • USDMXN is little changed at the start of a week where focus will be on talks ahead of the March 4 deadline for the US to impose 25% tariffs on all Mexican imports into the US. Last week, Economy Minister Ebrard met with US Commerce Secretary Lutnick, and although no important information was released, there appears to be some optimism that negotiations will see tariffs avoided.
    • Indeed, HSBC thinks that the recent US-Mexico talks to assess efforts on immigration and security-related issues could be enough to further postpone the potential implementation of some tariffs.
    • However, they believe that the uncertainty could weigh on growth, which along with disinflation will make room for rate cuts. With Banxico adopting a more dovish tone, highlighted in last week’s QIR and minutes, they see another 50bp rate cut in March, followed by a total of 100bp in rate cuts afterwards, in clips of 25bp.
    • To recap, we noted last week that several other analysts see a further 50bp cut in March, including Goldman Sachs, SocGen and Itaú, as Banxico front-loads its rate normalisation cycle. JP Morgan also sees another 50bp move at the May meeting, before slowing the pace back to 25bp.
    • Today, bi-weekly CPI data are unlikely to change the rate outlook, with a relatively benign core inflation print expected for the first half of February.