11/02/2021 MXN Interest Rate

Hi, my name is James Thatcher, I am the Head Analyst at Galaxy Software. It is my job to predict reactions to news events. Here are my predictions on the upcoming news at 7;

11/02/2021 MXN Interest Rate
The forecast is 4%
Previous = 4.25%

Bloomberg Survey:
6 = 4.25
16= 4.00
Avg = 4.07

Reuters Survey:
14 = 4.06 = 4.25
Avg =4.075
This means a +0.25 dev = 0.18 dev from average (bb).

Trade plans

MXN Sells:
S1 -0.25 a 50-bps cut, should be safe!!!
S2 none
S3 none

MXN Buys:
B1 +0.25 = Very very small!!! look for 400 pips and close…
B2 +0.5 = I hike of 0.25…. almost impossible, but very safe!
B3 +0.75 =

Comparable setups to today…

Nov 2020 = Same setup almost as today … we got a +0.25 dev, and 546 pips in 1 in on USDMXN
Link here= https://calendar.galaxysoftwareinc.com/…

May 2017= Had 35% chance of a hike… WIRP said 80% no chance of hike…+0.25, USDMXN = 400 pip 1 min, with no continuation.

Only chart available:

Notes about today’s event…

Even if Banxico does, in fact, lower its policy interest rate target to 4.00% from the current 4.25% level, less-dovish forward guidance, perhaps following hotter-than-expected inflation data, could see the Mexican Peso strengthen. On the other hand, in the event of USD/MXN buying pressure materializes, traders might consider fading the move as bearish USD/MXN poses a top trading opportunity for 2021. The decision aims to be divided once again, because in December two members of the Governing Board, Gerardo Esquivel and Jonathan Heath, considered a 25 basis point cut in the interest rate necessary.

Even Heath voted in the same direction since the November decision to “follow the downward cycle as far as possible” given the deep drop-in economic activity in Mexico due to the pandemic.

Since January there has been a new composition in the Governing Board due to the incorporation of Galia Borja, whose position could coincide with that of Esquivel and Heath.

But for tomorrow’s announcement, it should not be ruled out that Banxico will keep the reference rate unchanged.

The restart of the relaxation cycle no longer seems imminent. We will see.

So today we see if Borja is Dove or Hawk! Therefore, we should expect a good move if they hold rates (+0.25 dev) …. as that means she’s a Hawk… and that has future implications for monetary policy.

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