USD/MXN: Early Banxico easing unlikely to damage the Mexican Peso – ING

The Mexican Peso (MXN) continues to perform well. Economists at ING analyze USD/MXN outlook. 

Will Peso strength lead to early Banxico easing?

The market is starting to consider some early Banxico easing. 50 bps of cuts are priced over the next six months and 175 bps over the next 12. We think that could be too conservative and that the strong, real trade-weighted Peso could spark some early easing. Remember, the 575 bps policy spread over the Fed is wide.

With real rates so high in Mexico, we doubt early Banxico easing damages the Peso – and see it staying in a 16.75/17.25 range.