Mexico, Inflation plus Slow Growth

Mexico had a few Economic numbers today which certainly do not bode well form the economy. First,

Mexico's economic growth slowed more than economists forecast in the first quarter as the construction industry stagnated and agricultural output fell.

GDP which was expected to rise 3.3% was only able to gain 2.6% according to the latest statistics. This, to me, was not a big surprise given Mexico's proximity to the U.S. Eventually there needed to be some effect and the sign's seem to be materializing.

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Next came the inflation number's.

Annual inflation quickened to 4.83 percent in the first half of May from 4.56 percent in April, Banco de Mexico said today. The annual rate is the highest since December 2004 and is above the central bank's 2 percent to 4 percent target range.

Consumer prices fell 0.26 percent in the first 15 days of May, less than the 0.3 percent decline forecast by the median estimate of 19 economists in a Bloomberg survey. Core prices, which exclude volatile food and energy items, rose 0.26 percent, the bank said. Core inflation was higher than any of the 16 estimates in a Bloomberg survey.

This caused interest rates to move higher on the anticipation that the Central Bank will raise Official Rates. Although this is a real possibility I expect Mexican Rates to remain on hold for the next few month's similar to what will occur here in the U.S.

Crude today climbed to over $135 per barrel. As the trading session came to a close it was "back down" to $130.60 per barrel. Have we seen a top, well I think if we haven't we are pretty close. I sold Euro (once again) on the back of this view at 1.5700.

My other positions are as follows:

Short
Usd/Clp (I want to cut down on this a bit)
Usd/Cop
Usd/Mxn
Usd/Ars

My Rates positions are:

Looking for higher rates in Brazil and Mexico, while lower rates in Argentina.

Good Luck and Good Currency Trading.