Mexico City.- The Bank of Mexico (Banxico) indicated that the financial markets in the country have recently presented some episodes of greater volatility, including the beginning of June, so it will continue to monitor its evolution to take, if necessary, the actions that are required. .
“The peso has presented some episodes of greater volatility in recent months associated with the intensification of geopolitical conflicts in the Middle East and the delay of the date for the first rate cut by the Federal Reserve (Fed), as well as by idiosyncratic factors,” he noted in his June 2024 Financial Stability Report published this Wednesday.
“The Mexican peso has depreciated since the publication of the last Report,” he noted about the exchange market.
The central bank recalled that the national currency had maintained a markedly positive trend until mid-April, reaching a minimum of 16.26 pesos per dollar, driven by factors such as the balance of external accounts, the expectation of greater foreign investment given the relocation of productive chains, significant flows of remittances and the high interest rate differential compared to other economies.
“This behavior has deteriorated significantly in recent weeks, in line with the depreciation that the currency experienced during April, as well as the first weeks of June,” Banxico said.
Likewise, he stated that the Mexican Stock Exchange (BMV) had presented moderate gains during most of the period, in line with the behavior of the global equity market, given the strength in the publication of economic figures and quarterly corporate reports. that continue to show relevant increases in terms of income and profits.
“However, this behavior was reversed in recent days. Since the last publication of this Report, the stock markets in Mexico presented a moderate negative movement with some periods of volatility,” he mentioned.
“The Bank of Mexico remains attentive and vigilant to the evolution of the financial markets in the country to take, where appropriate, the actions required in the exercise of its powers, in coordination with other financial authorities and with strict adherence to the framework.” legal,” he added.
Regarding the evolution of uncertainty, Banxico commented that although with some variations, it remains at levels close to those at the end of 2023.
“During the first half of 2024, among the main issues that contributed to the level of the indicator, the slight increase in inflation in Mexico and the United States observed during March stands out, which generated expectations that interest rates will remain at high levels for a long time. longer period.
“Likewise, the reduction in economic growth expectations in Mexico stands out due to a possible slowdown in the United States, and the deterioration of the perception of security in the country,” he stated.
Regarding the financial position of the public sector, Banxico warned, from January to March, the balance had a greater deficit than anticipated and by the end of 2024 it is expected that the Financial Requirements of the Public Sector (RFSP) will be equivalent to 5.9 percent of the Gross Domestic Product (GDP), with which its Historical Balance would reach 50.2 percent of said aggregate.
Banxico reported that, since the publication of the last Report, the rating of Petróleos Mexicanos (Pemex) was reduced by two levels, maintaining the negative outlook, by one of the main agencies.
“According to the same agencies, the sovereign credit rating still faces important challenges, among which those related to the possible need for fiscal consolidation stand out after a higher deficit this year, especially in a context of continuity of financial support to Pemex, as well as setbacks unexpected in macroeconomic management or in relations between the partners of the Treaty between Mexico, the United States and Canada (T-MEC) given the uncertainty associated with the electoral process in the United States.
“In a scenario in which adjustments to national ratings were to materialize unexpectedly, it would be anticipated that the risk premiums associated with Mexico would increase, which could motivate a decrease in net capital flows to the country and, more generally, a deterioration of its macrofinancial risk profile”.
#Banxico #monitors #volatility #markets
