Rabobank strategists Christian Lawrence and Molly Schwartz note that Banxico’s June 25 decision highlighted an unchanged policy rate at 6.50%, in line with consensus. They expect Banxico to stay on hold through year-end, mirroring their stance on the Bank of Canada (BoC) and Federal Reserve (Fed). They project USD/MXN largely rangebound over summer, targeting 17.6 by year-end and downplaying any United States-Mexico-Canada Agreement (USMCA)-related premium.

Banxico hold keeps Peso rangebound

"Banxico left the policy rate unchanged at 6.50% at the June 25 meeting, as was widely expected by both traders and analysts (26 out of 26 in the Bloomberg survey). As expected, the decision was unanimous."

"We fully expect Banxico to remain on hold throughout this year. The same view as we hold for the Bank of Canada (2.25%) and the Federal Reserve (upper bound of 3.75%)."

"Banxico explicitly stated its plan to keep rates unchanged at 6.50% over the coming meetings."

"There was little to surprise the market at this meeting and the reaction was virtually non-existence, with USD/MXN not budging at all."

"We maintain the view that USD/MXN will predominately trade around current levels this summer with a base case forecast of 17.6 by year end. We see little USMCA premium as likely to emerge with a move to annual reviews following a lack of 16 year renewal come July 1."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)