Peso cuts losses after Banco rates cut

The peso cut its losses this Thursday in a session marked by the Bank of Mexico (Banxico), which lowered its reference interest rate for the first time since 2021, as the market had anticipated.

Now investors are focused on inflation data for the first half of March released on Friday in search of new clues about the central bank’s next steps.

According to Banxico data, the dollar was sold at 16.7373 pesos, representing a depreciation of 0.39% for the national currency compared to the previous session. The peso fell 0.74% in the morning, according to Reuters.

In its monetary policy announcement, Bancco said that, despite its rate cut, the monetary stance remains restrictive and warned that in future meetings it would take into account the inflation outlook, which still looks complex, given the Analysts said this would not be the beginning of a cycle of cuts.

We recommend: Banxico reduces interest rate to 11%

Still, the 25 basis points cut to leave the rate at 11% narrowed the attractive rate differential between Mexico and the United States, as the Federal Reserve cut its key rate a day earlier to between 5.25% and 5.50%. It was decided to maintain it. , where it has been since July.

Base Financial Group indicated that the peso’s depreciation, like most currencies in the exchange market, was due to the strengthening of the US dollar by 0.44%, according to the weighted index.

“However, downward pressure on the exchange rate following the Bank of Mexico’s monetary policy decision was limited,” the firm said in a report.

The base reported that the peso erased part of its morning losses as the market had already rejected Banco’s decision, the vote of central bank members was not unanimous, inflation expectations rose, and risks to inflation remained subdued. and that the monetary stance remains restrictive.

“Considering the above, it is likely that the Governing Board (of Banxico) will keep the rate unchanged on May 9 and pause to evaluate the trajectory of inflation during the rest of the year,” Bess opined.

Mexican stock exchange is up slightly

The benchmark S&P/BMV IPC stock index gained a modest 0.07% to 56,657.44 points, extending a solid performance from the previous day, when it recorded its biggest daily gain since mid-December.

Shares of pharmaceutical company Genoma Lab rose 2.48% on the day to 15.26 pesos, followed by shares of airport group OMA which rose 2.13% to 147.92 pesos.

In the debt market, 10-year bond yields fell 11 basis points to 9.15%, while the 20-year rate fell eight basis points to 9.39%.

With information from Reuters

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