While the US secular stagnation theme was all the rage, until some time in October, the rest of the world couldn't cut rate fast enough. However, now that things are flipped courtesy of a suddenly hawkish Fed which as per yesterday's FOMC announcement realized it is behind the curve on both inflation, and the potential Trump Fiscal Stimulus, everything has flipped, and shortly after every Arab Gulf nation hiked rates overnight in sympathy with the Fed to keep their pegged currencies level, moments ago Benxico surprised market watchers who had expected a mere 25 bps hike from 5.25% to 5.50% in the overnight rate, by doubling the tightening, and setting the overnight rate at 5.75%.

• BANXICO SAYS GLOBAL ECONOMY RECOVERY MAY CONTINUE
• MXN TURNS POSITIVE AFTER 50BPS BANXICO HIKE VS 25BPS EST.
• BANXICO SAYS RAISED RATE TO COUNTERACT INFLATIONARY PRESSURES

As a reminder, Banxico hiked previously by 50bps in February, June, Sept and November, and said that the increase is intended to counteract CPI pressure and bank will pay close attention to potential pass through from exchange rate, according to statement.

The immediate result has been a spike in the Mexican Peso, which is trying to offset all the losses suffered after the Fed announcement.

Keep an eye on the currency, however, because if history serves, the last time Mexico hiked the kneejerk reaction was quickly faded and the peso ended weaker on the day.