Banxico will announce its rate decision later today. Economists at ING analyze Mexican Peso’s outlook ahead of the meeting.
Banxico should remain hawkish
Survey respondents unanimously expect unchanged rates at 11.25%. Equally, we think Banxico will be more than happy to keep the 600 bps policy rate premium over Fed rates – a position that has kept USD/MXN relatively stable, reduced implied volatility and contributed to the Peso’s attractiveness for carry trade strategies.
Loose fiscal and tight monetary policy is normally a very positive environment for a currency and this is why we think USD/MXN will be trading comfortably below 17.00 into 2024.
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