Mexican Peso slumps, vulnerable to further Banxico’s easing
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Mexican Peso treads water as inflation figures hint at further easing by Banxico. Despite US payrolls falling short, a lower unemployment rate boosts the USD against the Peso. Interest rate forecasts suggest further easing in Mexico, with the Fed maintaining a cautious outlook for 2025. The Mexican Peso (MXN) reversed its course and depreciated against the Greenback on Friday after inflation data in Mexico justified the 50 basis points interest rate cut by Banco de Mexico (Banxico) on Thursday. In the United States (US), job data was mixed, as payrolls missed the mark but the Unemployment Rate edged lower. The USD/MXN trades at 20.60, up 0.86%. Inflation in Mexico edged lower in January, exceeding estimates revealed by the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). Headline and core inflation remained within the Banxico 3% plus or minus 1% range, and improved compared to the latest report, opening the door for further easing by the Mexican central bank. On Thursday, Banxico lowered borrowing costs from 10% to 9.50% and hinted that it could lower rates by the same magnitude in further meetings. Banxico’s officials added that inflation would converge to 3% in the third quarter of 2026. The USD/MXN pair extended its gains after the release of the last US Nonfarm Payrolls report. Although the figures came short of expectations, an improvement in the Unemployment Rate spurred a leg-up in the exotic pair. Furthermore, the interest rate differential between Mexico and the US will narrow. Banxico is expected to drop the primary reference rate to 8.50%, according to the cCentral bBank’s latest private economist poll. Conversely, the Federal Reserve (Fed) paused its easing cycle and projected two rate cuts in 2025, as revealed by last December’s Summary of Economic Projections (SEP). Daily digest market movers: Progress on Mexican inflation, weighs…
Filed under: News - @ February 8, 2025 5:18 pm