MXN: Cautious stance on rate cuts – Societe Generale

💡 DMK Insight

Banxico’s decision to hold the policy rate at 7.00% signals a cautious stance amid inflation concerns, and here’s why that matters for traders: With inflation still a hot topic, the central bank’s reluctance to lower rates could lead to a stronger Mexican Peso (MXN) in the short term. Traders should keep an eye on inflation data releases and any comments from Banxico officials, as these could influence market sentiment. If inflation shows signs of stabilizing, we might see a shift in policy, but for now, the Peso could benefit from this wait-and-see approach. Additionally, the MXN’s performance could affect related assets like emerging market equities and commodities, especially if the Peso strengthens against the USD. Watch for key levels around 18.50 to 19.00 MXN/USD, as a break above or below could signal a new trend. However, there’s a flip side: if inflation remains stubbornly high, Banxico might face pressure to act sooner than expected, which could lead to volatility in the MXN. So, staying alert to economic indicators and central bank communications is crucial for positioning in this environment.