Mexico’s CPI dropped 0.32% m/m in April, whereas the annual rate came in at 2.54%. April’s print came in a tad lower than projections, suggesting that the nation’s inflation trends are not strong in spite of the Mexican peso’s significant decline in the past nine months, noted Commerzbank. Given April’s inflation print, it is unlikely that the Bank of Mexico will hike rates.
Nonetheless, the central bank had mentioned that it will follow the rate hiking cycle of the US Fed. Therefore, the markets are pricing that the Bank of Mexico will raise rates by 75bps in the coming two years, said Commerzbank. The Mexican peso, surprisingly depreciated along with other emerging market currencies against the US dollar.
“We maintain our view that USD-MXN should trade around a central tendency of 17.50 over the coming months”, added Commerzbank.
