USD/MXN: Peso outlook remains promising – Commerzbank

The Mexican economy is running well. Economists at Commerzbank analyze MXN outlook.

Banxico will not risk missing its inflation target on a sustainable basis even after the start of the rate cut cycle

Mexico certainly benefits from the robust US economy, but the service sector also supports growth. The Mexican central bank Banxico is likely to see the latter with mixed emotions. The stubbornly high inflation levels in the service sector above all are slowing the disinflationary process, thus also creating uncertainty within Banxico as to when and at what speed rate cuts will be justifiable.

This cautious approach is what continues to justify a strong Peso, as it illustrates: Banxico will not risk missing its inflation target on a sustainable basis even after the start of the rate cut cycle. The FX market honours such a credible monetary policy, with the positive economic environment contributing its share.