Esther Reichelt, FX Analyst at Commerzbank, analyzes the outlook for the Mexican Peso following the nervousness in the US banking sector.

Banxico has significant scope for rate cuts in case of a crisis

“If the uncertainties were to continue, contrary to our expectations, putting undue pressure on the US economy this is also likely to critically affect the Mexican economy due to the close ties between the two, which would be reflected in a weaker inflation outlook sooner or later.”

“As Banxico has significant scope for rate cuts in case of a crisis thanks to its aggressive rate hike cycle the peso was amongst the biggest losers as a result of the turbulence in the US banking sector. However, if these fade as our economists expect, MXN should quickly retrace its losses thanks to Banxico’s continued hawkish approach.”