Anna 
On Thursday, the Mexican Peso (MXN) exhibited a slight decline against the US Dollar (USD), down about a quarter of a percent, in anticipation of crucial inflation data and the Bank of Mexico (Banxico) policy meeting scheduled for later in the day.
Market analysts widely anticipate that Banxico will maintain its interest rates unchanged at 11.00% following a rate cut in March. Lower interest rates typically exert downward pressure on a currency, while higher rates tend to bolster a currency by attracting more foreign capital inflows.
As of the current publication, the USD/MXN pair is trading at 16.94, EUR/MXN at 18.20, and GBP/MXN at 21.15.
Mexican Peso’s Movement on “Super” Thursday
The Mexican Peso’s downward movement on Thursday precedes the release of key inflation data for April, expected at 12:00 GMT, followed by the Banxico May monetary policy meeting at 19:00 GMT.
Central banks often maintain high interest rates in response to rising inflation, which can strengthen a currency by attracting increased foreign capital inflows. Conversely, lower inflationary pressures may prompt central banks to consider rate cuts, which could weigh on the currency.
Projections indicate that April’s headline inflation in Mexico is likely to rise to 4.63% year-over-year (YoY) but decrease to 0.19% month-over-month (MoM), compared to 4.42% YoY and 0.29% MoM in the previous month.
The forecast for core inflation is a decline to 4.40% YoY and 0.24% MoM.
Banxico’s Policy Consensus
Analysts anticipate Banxico to maintain its policy status quo in light of the data since its March meeting, where a rate cut was implemented. Deputy Banxico Governor Jonathan Heath indicated in April that further rate cuts would likely be paused due to robust growth in Q1.
Commerzbank does not expect a rate cut but suggests Banxico may revise its inflation forecasts for the second half of 2024, given the current data trends.
Wells Fargo also predicts that Banxico will hold interest rates steady, citing persistent inflation levels and the delayed timeline for anticipated Fed easing.
Overall, while inflation trends argue against significant rate cuts, the prospect of slowing economic growth may prompt Banxico to consider a modest adjustment in rates, especially if growth forecasts are revised downward.
The decision from Banxico’s meeting later today is anticipated to have implications on the Mexican Peso’s performance in currency markets.
