MEXICAN PESO PRESSURED AS BANXICO DECISION LOOMS

• Mexican Peso dips, USD/MXN rises 0.12% as market eyes key economic data and Banxico rate decision.
• Anticipated April inflation drop may prompt Banxico to consider cutting rates from 11.00% to 10.75%.
• US Fed officials, including Susan Collins and Neel Kashkari, urge caution in rate policy, impacting cross-border sentiment.

The Mexican Peso remains on the defensive against the US Dollar on Wednesday as investors brace for the Bank of Mexico (Banxico) monetary policy decision on Thursday. Before that, April’s inflation in Mexico is expected to dip in headline and core figures, which could weigh on the central bank’s decision. The USD/MXN trades at 16.91, gains 0.12%.

Data revealed during the week suggests that Mexico’s economy remains solid. This could prompt Banxico’s Governing Council members to evaluate the chance of slashing rates from around 11.00% to 10.75% at the next meeting. Nevertheless, market participants expect Banxico to remain on hold, with Bank of America’s analysts foreseeing at least four more rate cuts, which could drive the main reference interest rate to 10.00% in 2024.

Elsewhere, Federal Reserve (Fed) officials continued to grab headlines across the border. Boston Fed President Susan Collins said she expects demand to slow down to bring inflation to 2%, adding that there are risks of cutting rates “too soon.” She said that the current policy is well-positioned and that it is “moderately restrictive.”

On Tuesday, Minnesota Fed President Neel Kashkari said that rates would stay put for an extended period, adding that if rates need to be raised, they will do so.