USD/MXN jumps above 19.00 to test October highs
|- Mexican peso accelerates slide against US dollar on the back of risk aversion.
- USD/MXN challenges October highs at 19.20.
The USD/MXN rose significantly for the second day in-a-row boosted by a rally of the greenback and also affected by comments from US President Trump regarding immigration from Mexico.
Technical indicators point higher but...
The pair climbed from 18.85 and peaked during the American session at 19.18, the highest level in a week. From the top pulled back modestly and it was about to end the day hovering around 19.15, with the bullish tone intact. The greenback broke relevant short-term technical levels like 18.90 and 19.05. The rally was capped near the 19.20 area that is a strong barrier. A consolidation on top of the mentioned zone could clear the way to more gains with a potential target at 19.35.
The momentum remains positive but USD/MXN needs to hold on top of 19.20 to clear the way to more gains, a failure to do so would signal a continuation of the current consolidation range between 19.20 and 18.70.
Banxico minutes
Today, the Bank of Mexico released the minutes of its latest meeting when it kept inters rates unchanged at 7.75% on a divided decision. Board member Manuel Ramos-Francia voted for a 25 basis point rate hike back then due to the persistence of core inflation. Banxico officials consider they may need to raise rates again if high inflation persists. For the first time, the minutes showed how each member voted and why.
The Mexican central bank expects inflation to decline more slowly than previously expected amid increases in energy prices. All members considered that inflation risks are to the upside.
Trump triggered MXN slide
Earlier today, the Mexican peso started to decline after US President Trump threatened to close the southern border with Mexico over immigration issues. Trump wrote: "I must, in the strongest of terms, ask Mexico to stop this onslaught - and if unable to do so I will call up the U.S. Military and CLOSE OUR SOUTHERN BORDER!" and “"The assault on our country at our Southern Border, including the Criminal elements and DRUGS pouring in, is far more important to me, as President, than Trade or the USMCA. Hopefully Mexico will stop this onslaught at their Northern Border."
The immigration issue was also discussed in Mexico. President elect Andrés Manuel López Obrador mentioned that he wants to avoid repression against migrants while at the same time, also avoid a conflict with the US. "We will offer jobs, work to Central Americans. Anyone who wants to work in our country will have help, will have a work visa,” said AMLO.
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