(02 August 2018)DAILY MARKET BRIEF 2:Banxico expected to maintain rates unchanged

Today’s monetary decision is tough for the Mexican central bank. Inflation remains largely above the 3% target on one side but the economy still remains in shape on the other, and the peso already recovered this year amid optimism on the front of NAFTA talks with the US (USD/MXN year-to-date: -4.31%). Additionally, national elections have ended, relieving the central bank from further uncertainty risk.

Accordingly, we expect the central bank to maintain current key rate at 7.75% during today monetary policy meeting. The tone could be changing during next MPC meeting on 04 October 2018.

USD/MXN is trading at 18.6968, expected to decline slightly and approaching the 18.60 range in the short-term.

By Vincent Mivelaz