Mexico IPC Retreats From Record 70,111 as Banxico Rate Decision Looms

Mexico’s benchmark S&P/BMV IPC index pulled back sharply on Wednesday, shedding 1.44% after touching a record 70,111.74 earlier this week.

Investors booked profits ahead of Banco de México’s interest rate decision later today, with analysts divided over whether policymakers will cut 25 basis points to 6.75% or hold at 7.00%.

Key Market Data

Performance Analysis

The IPC opened Wednesday at 69,888.56—which proved to be the session’s high—before selling pressure drove the benchmark down to an intraday low of 68,186.96, a swing of more than 1,700 points.

The index partially recovered to close at 68,730.69, erasing most of the gains from earlier this week when the benchmark breached 70,000 for the first time to establish a new all-time high of 70,111.74.

Despite the retreat, the IPC remains up 1.67% on the week and roughly 6% year-to-date. The Materials sector has led recent gains at 5.3% over the past week, while earnings growth forecasts of 12% annually and valuations near the 3-year average P/E of 14.9x suggest the broader uptrend has room to run.

The Mexican peso softened modestly, with USD/MXN rising to 17.3444 as traders unwound carry positions ahead of the Banxico announcement. On the week, the peso remains stronger, with USD/MXN down 0.64% from its opening level of 17.4572.

Key Drivers

Today’s selloff is driven by positioning ahead of Banxico‘s first rate decision of 2026. Consensus remains sharply divided. Forex.com analysts noted market pricing leans toward a 25-basis-point cut to 6.75%, citing December’s inflation reading of 3.69%.

However, economists at Banamex and Banorte have argued for a prudent pause, reasoning that policymakers need time to assess the inflationary impact of January’s higher excise taxes (IEPS) and minimum wage increases.

Scotiabank noted that while a cut remains their base case, the probability of Banxico ending the cycle has increased.

The 325-basis-point spread with the Fed has been a crucial pillar of peso strength through the carry trade, and any signal of aggressive further easing could erode that advantage.

On the structural front, nearshoring continues underpinning confidence. FDI surged 14.5% in the first nine months of 2025 to $40.9 billion, and exports are projected to hit a record $700 billion in 2026.

Technical Outlook

The IPC’s daily RSI at 66.87 has retreated from elevated levels, relieving overbought pressure. Support is layered at 68,059, then at the key 20-DMA around 67,142.

The weekly RSI at 70.07 signals the index is approaching overbought territory on the higher timeframe, suggesting the pullback could extend before the next leg higher.

On USD/MXN, the daily RSI at 39.25 remains in bearish territory favoring further peso strength, though the Stochastic RSI at 26.51 indicates oversold conditions that could fuel a dollar bounce.

A hawkish surprise—holding at 7.00%—would likely push USD/MXN toward 17.19-17.29, while a dovish cut could drive the pair toward 17.45-17.57.

Analyst Perspectives

Scotiabank economists wrote that “a 25-basis-point cut remains our base case for the February 5 meeting, though the probability of Banxico ending the cutting cycle has increased.” They maintained their expectation of a 6.50% policy rate by year-end 2026.

Pamela Díaz, Economist for Mexico at BNP Paribas, projected just 0.9% GDP growth for 2026, citing “a negative output gap and a divergence in performance between sectors.” Deloitte’s global outlook was more constructive, calling for 1.6% growth as tariff uncertainty dissipates ahead of the USMCA review.

Looking Ahead

A hold at 7.00% would reinforce the peso’s carry advantage and likely attract renewed equity buying, while a cut to 6.75% could trigger further profit-taking and test peso resilience near 17.45.

This is part of The Rio Times’ daily coverage of Mexican markets and Latin American financial news.

For regional context, see the Brazil’s Ibovespa report: Brazil’s Ibovespa.

For regional context, see the Argentina’s Merval report: Argentina’s Merval.