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Christian Lawrence, Senior Market Strategist at Rabobank, expects Banxico to leave the Mexican policy rate on hold at 7.50% today.

Key Quotes

“MXN OIS suggests a 25bp hike is fully priced in and the majority of analysts are also expecting a move. We sit in the minority with our call for no change in rates.”

“Price pressures continue to ease and although currency depreciation does pose an inflationary risk further out, pass-through has generally been slightly lower and taken longer.”

“We see risk of further MXN depreciation heading into the July 1st Presidential election regardless of rates and as such, we expect Banxico to keep its powder dry until after then.”

“We have long been expecting the recent sell-off in MXN and we continue to see room for USD/MXN to breach the 21 handle in the coming weeks as we head towards the election.”