USD/MXN: Mexican peso could depreciate further ahead of the presidential elections - Wells Fargo

Analysts at Wells Fargo, warn that the presidential election results (July 1) could have significant implications on the peso as well as on economic growth in Mexico.

Key Quotes:

“The Mexican economy expanded 2.0 percent in 2017. Although last year’s growth was a marked slowdown from a more robust pace in 2016, we expect growth to regain strength this year.”

“Inflation has continued to subside after reaching 6-plus percent late last year. However, inflation remains above the 3.0 percent target rate of the Mexican central bank. After increasing its policy rate to 7.50 percent in February, the central bank has remained on hold. Uncertainties still loom regarding NAFTA renegotiations, upcoming presidential elections as well as concerns of tariff retaliation. On that basis, we expect the central bank to remain on hold in the near term.”

“The Mexican peso could depreciate further ahead of the presidential elections. We caution that election results could have significant implications on the peso as well as on economic growth in Mexico. While there are multiple areas of risk to the Mexican economic outlook, we expect the Mexican economy to continue to expand this year, growing 2.2 percent in 2018.”