Mexican Peso: Stable summer trading view against US Dollar – Rabobank

Rabobank strategists Christian Lawrence and Molly Schwartz note that Banxico’s June 25 decision highlighted an unchanged policy rate at 6.50%, in line with consensus. They expect Banxico to stay on hold through year-end, mirroring their stance on the Bank of Canada (BoC) and Federal Reserve (Fed). They project USD/MXN largely rangebound over summer, targeting 17.6 by year-end and downplaying any United States-Mexico-Canada Agreement (USMCA)-related premium.

Banxico hold keeps Peso rangebound

"Banxico left the policy rate unchanged at 6.50% at the June 25 meeting, as was widely expected by both traders and analysts (26 out of 26 in the Bloomberg survey). As expected, the decision was unanimous."

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"We fully expect Banxico to remain on hold throughout this year. The same view as we hold for the Bank of Canada (2.25%) and the Federal Reserve (upper bound of 3.75%)."

"Banxico explicitly stated its plan to keep rates unchanged at 6.50% over the coming meetings."

"There was little to surprise the market at this meeting and the reaction was virtually non-existence, with USD/MXN not budging at all."

"We maintain the view that USD/MXN will predominately trade around current levels this summer with a base case forecast of 17.6 by year end. We see little USMCA premium as likely to emerge with a move to annual reviews following a lack of 16 year renewal come July 1."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)