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Weak Q4 GDP Data Opens Door For March Interest Rate Cut

MEXICO
  • Q4 GDP data disappointed earlier, with the economy growing by a smaller-than-expected 0.1% q/q last quarter, vs. +0.3% consensus and +1.1% prior. In annual terms, this brought GDP growth down to 2.4% y/y, from 3.3%, the weakest pace since Q421. The slowdown in growth in Q4 was broad based and it opens the door for Banxico to potentially adopt a more dovish stance at its Feb 8th monetary policy meeting.
  • CIBC notes that today’s data were below central bank estimates. As a result, this should provide the Banxico with enough room to explicitly signal a rate cut in its March meeting as the ex-ante real rate moves further into restrictive territory. CIBC expect USDMXN to resume its upward path back to the 17.35-17.40 range in the short term.
  • USDMXN is trading little changed so far today, and despite a brief pop to 17.2572 in the aftermath of the GDP data, spot has been contained within Monday’s extremes. With the pair remaining below the 17.3860 Jan high, overall technical conditions remain bearish for now. Initial support to watch lies at 17.0566, the Jan 22 low.
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