Title: Analysts Lower Forecasts as Mexican Peso Appreciates Against the Dollar
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The Mexican peso has displayed a strong appreciation against the US dollar, causing analysts to revise their forecasts for the currency’s performance. According to the latest Citibanamex survey conducted on Thursday, July 20, experts now expect the peso to trade at 17.95 units per dollar by the end of the year, down from the previous consensus of 18.30 pesos per dollar two weeks ago.
Out of the 32 participants in the survey, Bank of America holds the highest expectation at 19 pesos per dollar, while BNP Paribas has the lowest forecast at 16.70 pesos. This shift in expectations reflects the changing dynamics in the Mexican economy and its relationship with the US dollar.
Furthermore, the Citibanamex survey also revealed alterations in forecasts for general inflation and Gross Domestic Product (GDP). Analysts have revised their expectations for general inflation to 4.66 percent, down from 4.80 percent, while core inflation has increased to 5.17 percent from 5.15 percent.
Regarding GDP, the consensus anticipates an economic growth rate of 2.4 percent for 2023, slightly surpassing the previous projection of 2.3 percent from fifteen days ago. The estimate for 2024 remains steady at 1.5 percent.
However, not all experts share the same outlook. XPInvestments predicts a growth rate of 3.2 percent this year, the highest among all forecasts, while Ve por Más and Signum Research expect a more conservative expansion of 1.9 percent.
As for the interest rate, which is managed by the Bank of Mexico (Banxico), projections remain unchanged. The consensus suggests that the next interest rate move will be a cut of 25 basis points in December, leading to a year-end rate of 11.00 percent.
Gabriel Casillas, chief economist for Latin America at Barclays bank, analyzes the factors behind the peso’s appreciation against the dollar. He highlights the shrinking investment universe in the emerging world, including the divestment of South African assets due to arms sales to Russia. Additionally, it is perceived that Latin American central banks will lower their interest rates sooner than Banxico, further bolstering the position of the Mexican peso. Casillas also mentions the positive impact of the Supreme Court of Justice of the Nation’s resolution regarding President Andrés Manuel López Obrador’s invalidated ‘plan B’ of the Electoral Reform, which has positively influenced perceptions about the state of democracy in Mexico.
The Mexican peso’s appreciation against the US dollar is a significant development for the country’s economy. With the revised forecasts and various factors influencing its performance, experts will continue to closely monitor the currency’s trajectory in the coming months.
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