Mexican peso consolidating gains vs. the USD month-to-date

The Mexican peso continues consolidating gains vs. the USD and month-to-date has advanced around 3%. In the short-term, MXN traders should look to the central bank for inspiration to send the peso consistently below the psychological USD-MXN 15.00 level. 

The Central bank of Mexico will release its quarterly inflation report today. In this document, Banxico is expected see pleased with inflation trajectories observed in the past months and the expected path that inflation is forecasted to follow in the months to come. In spite of this, we will look for hints in the text of potential FX behaviour expectations (MXN mostly) once the US Fed tightening cycle begins and thus Banxico should be forced to make a decision on when to start equalizing domestic monetary conditions in order to avoid excessive FX weakness and/or volatility. 

At this point, a combination of a slow economic recovery and inflation being under control suggests that Banxico could start its own cycle after the US Fed actually starts withdrawing liquidity but in no case room for rate cuts is seen.

The "reactive nature" should be to avoid subtracting unnecessary impetus to the ongoing economic recovery but at the same time making sure that potentially weaker FX levels don't start filtering into inflation and inflation expectations, says Commerzbank.