Societe Generale strategists expect the central bank of Mexico, Banxico to hold rates at 6.50% on Thursday, with the statement potentially challenging market pricing for 80bp of tightening over 12 months. They note Fed policy remains a key input and that political risk around United States-Mexico-Canada Agreement (USMCA) talks persists, while USD/MXN retains an upside bias with 17.50 identified as a key hurdle.

Banxico hold and USMCA risks watched

"In LatAm, we expect the Banxico to leave rates on hold at 6.50% on Thursday. The focus will be on the statement and could test market pricing for 80bp of tightening in 12 months."

"Fed policy remains a key input and last week’s hawkish tilt in the US may also applies the country’s trading partner."

"The US and Mexico completed the second round of USMCA review talks covering agriculture, labour, environment and rules of origin, alongside autos, steel and aluminium."

"Progress is steady, but political risk — mainly from the US, hangs over an agreement ahead of the July 1 deadline. The pact could be extended for 16 years or move to annual reviews within a 10-year window."

"USD/MXN retains an upside bias with 17.50 as the key hurdle."

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