Daily digest market movers: Mexican Peso trips down after US CPI
- Mexico’s Industrial Production in January rose by 0.4% MoM as expected, up from -0.7%. In the twelve months to January, production increased by 2.9%, above estimates, smashing December’s 0% reading.
- US CPI in February came at 0.4% MoM, aligned with estimates that were up from 0.3%. Annually based, prices jumped from the 3.1% estimate and the previous reading to 3.2%.
- Core prices expanded 0.4% MoM, unchanged, up from estimates of 0.3% MoM; yet they slowed in the 12 months to February to 3.8% from 3.9%.
- Business activity in the sector segment in the US remained mixed, while Factory Orders plummeted. According to the ADP Employment Change report, the labor market cooled further, even though private hiring remained solid. January’s Nonfarm Payrolls report was revised downward, which triggered a reaction in the swaps market.
- A Reuters poll showed investors estimate the Fed to be the first central bank to cut rates in June.
- Meanwhile, 52 of 108 economists expect the Fed to cut rates by 75 basis points in 2024, with 26 saying 100 bps.
- A Reuters poll sees the Mexican Peso depreciating 7% to 18.24 in 12 months from 16.96 on Monday, according to the median of 20 FX strategists polled between March 1-4. The forecast ranged from 15.50 to 19.00.
- A Reuters poll shows 15 analysts estimate that inflation will slow down in February, corroborating bets that the Bank of Mexico (Banxico) could cut rates as soon as the March 21 meeting.
- Banxico’s private analysts' poll projections for February were revealed. They expect inflation at 4.10%, core CPI at 4.06%, and the economy to grow by 2.40%, unchanged from January. Regarding monetary policy, they see Banxico lowering rates to 9.50% and the USD/MXN exchange rate at 18.31, down from 18.50.
- During Banxico’s quarterly report, policymakers acknowledged the progress on inflation and urged caution against premature interest rate cuts. Governor Victoria Rodriguez Ceja said adjustments would be gradual, while Deputy Governors Galia Borja and Jonathan Heath called for prudence. The latter specifically warned against the risks of an early rate cut.
- Banxico updated its economic growth projections for 2024 from 3.0% to 2.8% YoY and maintained 1.5% for 2025. The slowdown is blamed on higher interest rates at 11.25%, which sparked a shift in three of the five governors of the Mexican Central Bank, who are eyeing the first rate cut at the March 21 meeting.
- The CME FedWatch Tool shows traders increased their bets for a 25-basis-point rate cut in June, down from 72% a day ago to 68%.
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