USD/MXN to trade within 20.50-21.50 over coming months before breaking north of 22 by year-end – Rabobank

Banxico will announce its latest rate decision on Thursday, February 10 and economists at Rabobank expect another 50bp, taking the policy rate up to 6.00%. Turning to the USD/MXN, they expect the pair to move in a 20.50 to 21.50 range.

Banxico to have relatively little impact on USD/MXN

“The risk to the USD/MXN pair is that Banxico only raises rates 25bp but we see little chance of this and are confident of a 50bp move. It may well be a split decision and the degree of the split could impact MXN but our base case is that the meeting will have relatively little impact on USD/MXN.”

“USD strength has waned of late but we do not think USD has much further downside to run and see support emerging over the coming months.”

“Our base case forecast for USD/MXN to primarily trade within a 20.50 to 21.50 range over the coming months before breaking north of 22 by year-end.”

“The Russia/Ukraine tensions do pose a strong USD bullish risk.”