USD/MXN: Hawkish Banxico should be peso-positive – Standard Chartered
|Banco de México (Banxico) raised the policy rate by 50 bps in May. Economists at Standard Chartered now expect Banxico to raise the policy rate by 75 bps in June (versus 25 bps prior). In their view, hawkish Banxico should support the Mexican peso in the near-term.
Banxico to raise the policy rate by 75 bps in June
“The increasing possibility of a 75 bps rate hike from Banxico in June should exert downward pressure on USD/MXN.”
“In the near-term, with broad FX volatility declining, high carry should continue to support the peso. However, MXN has shown a rising correlation to US equities, which warrants caution given shaky risk sentiment.”
“Despite vulnerability to broader market moves, we think MXN benefits from attractive underlying macro fundamentals. Mexico’s external vulnerabilities are limited, with low foreign positioning in fixed income and a current account bolstered by record remittances.”
“Over the medium-term, anaemic domestic growth and a lack of structural reforms will remain a headwind, while the potential for a US slowdown is a key risk to watch.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.