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Mexico: Banxico to cut policy rate through the year – Rabobank

Senior market strategist at Rabobank Chris Lawrence is expecting a year of continuous rate cuts by Banxico. The USD/MXN pair is currently trading at 18.6455 and shows thin falls this year.

Key quotes

“We expect Banxico to cut the policy rate 25bp to 7.00% on Thursday,  February 13th.” 

“We see Banxico cutting rates to 5% by year-end on the assumption that our call for six Fed rate cuts comes to fruition. If the Fed does not cut rates at all and the US avoids a recession then we see a 6% low for Banxico.” 

“We expect growth in 2019 was non-existent and we only expect growth of 0.3% y/y in 2020.”

“We expect USD/MXN to primarily trade below 18.80 as demand for carry continues but a sharp unwind to between 19.10-19.20 would be triggered by a meaningful spike in vol.”

 

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