USD/MXN will be trading in the 16.50-17.00 area later this year – ING

Banxico meets to set interest rates today. The Mexican Peso (MXN) has been one of the very few currencies to appreciate against the dollar on a total return basis this year. Economists at ING analyze MXN outlook ahead of the decision.

Strong demand to emerge for the Peso on any dips

We think the Peso would not sell off too aggressively if Banxico did surprise and cut its 11.25% policy rate today. For reference, four of thirty economists polled by Bloomberg are looking for a cut.

And even if rates were cut, we think 10%+ implied yields, backed by supportive fiscal policy in an election year, should see strong demand emerge for the Peso on any dips. 

We think USD/MXN will be trading in the 16.50-17.00 area later this year when the Dollar trend turns broadly lower.