Commerzbank’s Michael Pfister highlights that the Bank of Mexico (Banxico) is expected to continue its monetary easing cycle, following a rate cut in March that signaled a dovish policy direction. According to the report, all economists surveyed by Bloomberg anticipate another 25 basis point rate cut at the upcoming decision, reflecting a consensus for further easing in the near term [1].
Despite this consensus among economists, market participants appear more cautious, with only about 11 basis points of easing priced in over the next three months. Furthermore, some market expectations even point to potential interest rate hikes by the end of the year. Commerzbank, however, expresses skepticism about this scenario, citing Banxico’s dovish stance and projecting that further easing is more likely than a reversal to tightening [1].
As a result of the anticipated continuation of Banxico’s easing cycle, Commerzbank expects the Mexican Peso (MXN) to weaken and the USD/MXN exchange rate to rise in the coming months. The report underscores that the market may be underestimating the extent of Banxico’s dovishness and the potential for further peso depreciation [1].
CONCLUSION
Commerzbank forecasts that Banxico’s ongoing easing cycle will put downward pressure on the Mexican Peso, leading to higher USD/MXN levels. While economists broadly expect another rate cut, market pricing remains cautious, potentially underestimating the central bank’s dovish stance.