On Thursday, the Bank of Mexico will have its board meeting. Analysts at Rabobank, expect Banxico to leave the policy rate at 4.25% on Thursday. They see that domestic developments will continue to take a back seat when it comes to USD/MXN price action over the coming months although this is likely to shift by the second half of 2021.
Key Quotes:
“We expect Banxico to leave the policy rate unchanged at 4.25% on Thursday, November 12th. We maintain the view that Banxico will cut rates to 4.00% by year-end but expect the Bank to hold until the December meeting. That said, we will be the first to admit that his is a tough call and we expect a split decision from the board. Indeed, USD/MXN price action since we laid out our call for a pause has been supportive of a move this week with USD/MXN falling 7.5% from an intraday high of 21.978 to 20.56 at the time of writing.”
“We do, however, expect another 25bp cut to 4.00% at the December meeting and we see the Bank cutting below 4% in Q1 of next year.”
“We have revised down our USD/MXN forecasts to reflect a more constructive risk environment into year-end and early 2021.”
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