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10 Apr 2015
Banxico could hike after the Fed – Scotiabank
FXStreet (Edinburgh) - Following the release of the Banxico minutes, Chief FX Strategist at Scotiabank Eduardo Suarez sees the likeliness that Banxico could hike after the Fed.
Key Quotes
“Relating to what we believe is one of the most discussed topics regarding Mexico, only one board member mentioned that Banxico needs to be ready to pre-empt the Fed due to potential financial market volatility”.
“That argument was countered by another member who suggested that USD auctions can be a good way of dealing with FX volatility (which is our view of what would be done)”.
“In addition, two members countered that pre-empting the Fed could prove tricky, and provide little benefit”.
“Overall, we think the minutes relatively strongly supported our view that if volatility rises ahead of a potential Fed hike view, the board could increase FX intervention, but that ultimately Banxico's hikes will be closely linked to the Fed's, but we think’s Banxico’s moves will come after the US central bank”.
Key Quotes
“Relating to what we believe is one of the most discussed topics regarding Mexico, only one board member mentioned that Banxico needs to be ready to pre-empt the Fed due to potential financial market volatility”.
“That argument was countered by another member who suggested that USD auctions can be a good way of dealing with FX volatility (which is our view of what would be done)”.
“In addition, two members countered that pre-empting the Fed could prove tricky, and provide little benefit”.
“Overall, we think the minutes relatively strongly supported our view that if volatility rises ahead of a potential Fed hike view, the board could increase FX intervention, but that ultimately Banxico's hikes will be closely linked to the Fed's, but we think’s Banxico’s moves will come after the US central bank”.