Daily digest market movers: Mexican Peso appreciates ahead of busy schedule
- Last week, Banxico’s April poll showed that private economists estimate inflation to end the year at 4.2% in 2024, underlying prices at 4.1%, and the economy to grow by 2.25%. Regarding the USD/MXN, analysts revised their projections downward from 18.10 to 17.
- Mexico’s economic calendar will feature the release of the Consumer Price Index (CPI) for April, estimated at 0.18% MoM, below March’s reading. In the twelve months to April, the CPI is foreseen climbing from 4.42% to 4.63%.
- Most bank analysts predict that Banxico will keep interest rates steady with a unanimous decision expected from the Governing Council. However, future meetings are anticipated to be more contentious, potentially leading to divided votes. This expectation arises from comments by two Deputy Governors, Irene Espinosa and Jonathan Heath, who have stated that inflation is still elevated, necessitating that interest rates stay at higher levels.
- The softer-than-expected US jobs data has heightened the likelihood that the Fed may reduce interest rates later in the year. April,Nonfarm Payrolls showed an addition of only 175,000 workers, falling short of expectations and significantly below March's revised figure of 315,000.
- Fed officials acknowledged that risks to achieving its dual mandate on employment and inflation “moved toward better balance over the past year,” which signals that if labor market data is weak, it could pave the way for cutting rates.
- Data from the futures market see odds for a quarter percentage point Fed rate cut in September at 86%, versus 55% ahead of last week’sFOMC decision.
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