- Mexico: In the Citibanamex survey, analysts expect different scenarios for Banxico’s monetary policy decision
It took the BoJ just one week to walk back the hawkishness it showed at its rate hike announcement on the 31st. A dovish speech by Dep Gov Uchida where he intimated that recent market volatility and losses have to be taken into account for monetary policy settings—i.e. would restrict additional hikes—has the JPY well offered and markets trading with a positive mood led by gains in Japanese bourses.
European indices are up roughly 1% on average after a 1.2% rise in Japan’s Nikkei and about double in TOPIX while Chinese equities were mixed and unchanged on average as export growth disappointed while imports growth beat. The data suggest that China’s strongest growth engine currently, global exports demand, is softening while the imports beat reflected front-loading of semiconductors equipment before trade curbs and a jump in crude oil—i.e., not a strong Chinese household consumption story. With that, iron ore and copper are down about 1.5% but crude oil is holding up 0.5% higher.
All in all, comments by Fed and BoJ officials and the stronger than expected ISM services data on Monday have neutralized the risk-off/buy havens mood that Asia markets kicked off the week with. The JPY has weakened from 145 to around 147.50 yen per USD at writing on Uchida, a 2% decline, and, wouldn't you know it, the MXN is rallying 1.8% to the 19.20 zone or about where it closed on Friday (also flat on the week versus JPY). It’s a positive development ahead of tomorrow’s Banxico decision, but can it hold?
The G10 day ahead is extremely quiet while the Latam calendar also doesn’t have much aside from international trade data out of Chile at 8ET that shouldn’t move markets. Colombian markets are closed today for holidays, with the baton passed from Peruvian traders that stayed home yesterday but return to the office today. Aside from data, we’ll have BCCh Pres Costa speaking at 8.30ET (though the speech on payment systems may be of little interest for markets), while local lawmakers in the senate’s labour committee vote on the government’s pension reform proposal.
—Juan Manuel Herrera
MEXICO: IN THE CITIBANAMEX SURVEY, ANALYSTS EXPECT DIFFERENT SCENARIOS FOR BANXICO’S MONETARY POLICY DECISION
According to the results of the Citibanamex Survey, the median of respondents expects Banxico’s next cut, of 25bps, to come in September. However, analysts are split across several possible scenarios: ten of the thirty-three analysts polled expect the next cut to be at Thursday’s meeting, while on the opposite end five don’t expect this until after the September announcement. The end-2024 rate forecast median increased to 10.50% (10.25% previously), and for end-2025 it rose to 8.50% (from 8.38%).
As for headline inflation forecasts, these increased for 2024 and 2025, to 4.60% (4.40% previously) and 3.90% (3.85% previously), respectively. For core inflation, the forecasts remained practically unchanged, at 4.00% for 2024 and 3.80% (3.79% previously) for 2025. This upward movement comes after the latest inflation print, which surprised on the upside, due to pressures on agricultural and energy prices.
The survey results contrast with the information implied in markets: in the next three months, the curve incorporates 38bps of cuts, after only one was forecast last week. The governing board has highlighted that the slowdown in economic activity could support the disinflationary process, justifying a cut. However, recent volatility in the foreign exchange market and political uncertainty complicates the scenario for the central bank.
—Brian Pérez & Luisa Valle
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