Daily digest market movers: Mexican Peso hovers near last week’s lows

The language of the Banxico minutes was less “hawkish,” indicating a more flexible approach, according to analysts cited by El Economista. Analysts at Goldman Sachs commented that the Banxico Governing Council is tilting toward easing monetary policy unless exogenous shocks impact the USD/MXN exchange rate.

The latest inflation report in Mexico showed that headline and underlying inflation continued to dip toward Banxico’s goal of 3% plus or minus 1%, while economic growth exceeded estimates but finished below Q3’s 3.3%. Those factors added to the plunge in Retail Sales:I.

Mexico’s Consumer Price Index (CPI) in the first half of February was 4.45%, down from 4.9% YoY.

Mexico’s Core CPI slowed from 4.78% to 4.63% in the yearly data.

Mexico’s GDP for Q4 2023 exceeded estimates of 2.4% YoY and hit 2.5%, less than Q3 2023 print of 3.3%.

Economic trade issues between Mexico and the US could depreciate the Mexican currency if the Mexican government fails to resolve its steel and aluminum dispute with the United States. US Trade Representative Katherine Tai warned the US could reimpose tariffs on the commodities.

US New Home Sales rose by 1.5% from 0.651M to 0.661M, less than the 0.68 M expected.

The last meeting minutes of the US Federal Reserve (Fed) showed that policymakers remain hesitant to cut rates amid fears of a second round of inflation. They have expressed willingness to adjust policy when necessary but remain cautious, indicating no urgency to act. This stance is supported by current economic data suggesting strength in the economy, which could potentially revive inflationary pressure.

Market players had trimmed the odds for a first 25 basis point (bps) rate cut in June, with odds lying at 49.4%, while 40% of investors expected the Fed to keep rates unchanged at the current level of 5.25

%-5.50%.