Banxico to raise the policy rate by 25bp to 6.50% - Rabobank

Christian Lawrence, Senior Market Strategist at Rabobank, expects Banxico to raise the policy rate 25bp to 6.50% on Thursday 30th March.

Key Quotes

“We now see the policy rate at 7% by year end in contrast to our previous call of 6.75%.”

“Although the relationship between interest rate differentials and USD/MXN has been inverted, we now expect rate hikes going forward to provide more support for MXN.”

“MXN carry attractiveness has risen sharply, particularly relative to the rest of LatAm.”

“Although we see arguments for more MXN support from a rates perspective and from a seemingly more muted trade stance north of the border, the latter point is subject to rapid change and USD/MXN is only a Trump trade tweet away from a return to the 20s.”