Mexico: Bearish on the peso regardless of the Banxico expected cut – TDS

Economists at TD Securities believe that Banxico will continue to ease at a 50bp pace while the Mexican peso will possibly see selling pressure on a larger than expected move. USD/MXN trades at 24.101.

Key quotes

“We expect Banxico to cut by 50bps and bring the overnight rate to 5.50%, but see a not-insubstantial risk of a larger move, albeit with a nuanced message from the central bank.” 

“We see MXN remaining under fundamental pressure, however, the degree to which Banxico surprises with the size of easing or with a dovish tone at the May meeting may negatively impact the peso in the short-term.”