Daily digest market movers: Mexican Peso treads water amid improvement on economic activity

INEGI revealed the Economic Activity Indicator in February expanded by 1.4% MoM, up from a -0.9% contraction, and 4.4% YoY, better than the 2% in January.

Banxico Governor Rodriguez Ceja added that services inflation is not showing a clear downward trend. She added that the Peso’s strength has, at some points, helped contain inflation since the cost of goods has not risen as quickly as before, especially because of the effect on importers.

Last week, the International Monetary Fund (IMF) updated its economic growth projections for Mexico, reducing the 2024 growth forecast from 2.7% to 2.4% and the 2025 forecast from 1.5% to 1.4%. The IMF explains that the downward revision for 2025 is due to expected fiscal tightening by the incoming administration, which will likely reverse the current fiscal expansion, contributing to this year's growth.

Chicago Fed National Activity Index increased to 0.15 in March from 0.09 in February. The index’s three-month moving average increased from -0.28 in February to -0.19 in March.

Besides Powell's hawkish tilt last week, Chicago Fed President Goolsbee shifted neutral, saying that it makes sense to wait and get more clarity before easing policy, adding that the current restrictive monetary policy is appropriate.

Earlier, Atlanta Fed President Raphael Bostic commented that the Fed might not reduce rates until the end of 2024, while the New York Fed's John Williams commented that current monetary policy is in a good place, indicating no rush to cut rates.

Data from the Chicago Board of Trade (CBOT) suggests that traders expect the fed funds rate to finish 2024 at 4.985%, down from 4.995% last Friday.