Emerging market stocks hit a near seven-week low on worries around the U.S. rate hike trajectory ahead of the Federal Reserve’s meeting minutes while Mexico’s peso rose as investors awaited inflation data from the country later in the week. MSCI’s index for EM equities fell 1.2% at 1454 GMT, hitting its lowest since early January.
Minutes from the Fed’s latest meeting due at 1900 GMT could offer further clarity on the central bank’s future monetary tightening plans at a time when data pointing to surprising strength in major global economies has spurred fears of interest rates staying higher for longer. “Markets are nervous about the Fed, but policymakers ultimately face limits.
Despite Chair (Jerome) Powell’s uncompromising rhetoric, the Fed has already pivoted to smaller hikes and the next pivot to stopping the rate hikes will be more consequential for markets,” said Andres Abadia, chief Latin American economist at Pantheon Macroeconomics.
Meanwhile, Latin American stocks and currencies were muted against the dollar. Oil exporter Mexico’s peso which has been one of the strongest performing currencies in the Latam region this year rose 0.5% against the greenback despite lower crude prices. Inflation data from the country as well as minutes from the Bank of Mexico’s February monetary policy meeting when it raised rates by a greater-than-expected 50 basis points are due on Thursday.
“We (and the markets) are awaiting Mexican inflation data as well as Banxico’s February meeting minutes before considering further gains in the MXN,” wrote Juan Manuel Herrera, senior economist at Scotiabank in a note.
Another 50 basis point rate hike is likely from the Bank of Mexico next month, Herrera concluded.
Source: El Economista
