Market news

11 November 2021

USD/MXN could jump to 20.75 if Banxico rises only 25bps – Wells Fargo

On Thrusday, the Bank of Mexico (Banxico) will announce its decision on monetary policy. Market consensus points to a 25bp rate hike while some analysts see a 50bp hike. Analysts at Wells Fargo side with financial markets and expect a 50 bps rate hike; however, should consensus be proved accurate, the Mexican peso could come under pressure in the immediate aftermath of the meeting.

Key Quotes: 

“Should consensus economists prove accurate and Banxico lift rates only 25 bps, we would expect the Mexican peso to selloff sharply and USD/MXN to push toward the MXN20.75 level. On the other hand, should the central bank lift rates 50 bps and maintain a similar level of concern over inflation as we expect, the peso reaction could be more muted. Should our base case scenario unfold, we would expect the Mexican peso to settle back to pre-policy rate announcement levels as we believe financial markets are priced for this scenario.”

“In a nod to our fellow international economists, we do feel financial markets are priced for too aggressive tightening between now and the end of this year. Right now, markets are priced for 100 bps of tightening before the end of 2021. In our view, following a 50 bps hike on Thursday, policymakers are likely to slow the pace of tightening and lift the Overnight Rate only 25 bps in December. Our less hawkish view relative to market pricing is key a rationale behind our medium-term view for Mexican peso weakness.”

“As financial markets adjust to a more gradual pace of tightening after the November meeting, we would expect downward pressure on the peso to build and for the currency to weaken into the end of 2021.”

Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2022 Teletrade-DJ International Consulting Ltd

Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with the Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Teletrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies.

Teletrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 72.72% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Choose your language/location