The Mexican Peso (MXN) has been underperforming recently. However, economists at ING expect the USD/MXN pair to move back toward 19.00.

Banxico dances toe-to-toe with the Fed

“Banxico followed the Fed again by hiking the policy rate by 50 bps to 10.50%. That keeps the 600 bps+ policy spread over US rates and should keep the MXN supported. Banxico also said that further rate hikes should be expected. In practice, this should mean another 50 bps hike in February to match the Fed.”

“MXN underperformance should not last long. High rates, low volatility, and Mexico proving the most likely candidate for nearshoring benefits all suggest that USD/MXN should be trading back at 19.00 sooner rather than later.”

This article was originally published by Fxstreet.com.Read the original article here.

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