However, Mexico’s proximity to the U.S. could once again be an advantage if the Fed announces an interest rate hike next month.
“We think that the central bank will leave the overnight rate unchanged at 3.0% in [Monday’s] monetary policy meeting; the decision is due at 2 p.m. EDT. … the bank will likely state that the balance of risks to Mexico’s growth and inflation has remained unchanged since the previous meeting. Still, the bank will likely reiterate that inflation has been below expectations, that inflation expectations have remained unchanged and that the pass-through to inflation from currency weakness has been limited. The bank will also likely mention that further episodes of peso weakness are the main risk to inflation and that it will continue to monitor closely the behavior of local financial markets,” said Credit Suisse in a note posted by Dimitra DeFotis of Barron’s.
Although it has no energy sector exposure, EWW has been dragged lower by falling oil prices because Mexico is one of Latin America’s largest crude producers.
iShares MSCI Mexico Capped ETF
