USD/MXN rises to 19.50, remain in recent range
|- A stronger US Dollar against Emerging market currencies boosted USD/MXN to highest since Wednesday.
- Bank of Mexico Board meeting on Thursday: rate cut expected.
The USD/MXN pair rose to 19.50 during the American session but it failed to break higher and pulled back. As of writing trades at 19.46 modestly higher for the day, holding a short-term bullish bias but limited under 19.50. Over the last ten days, USD/MXN has been moving in a range between the critical support of 19.30 and the resistance of 19.50.
The key event ahead in Mexico is the Banxico meeting. After the rate cut from the Federal Reserve, a majority of analyst expects the Mexican central bank to do the same. The cut would bring the rate from 8.0% to 7.75%. With the slowdown in inflation, the appreciation of the MXN, and the stagnation of the economy, a more aggressive move from Banxico should not be ruled out.
On a wider perspective, Luis Hurtado, analyst at CIBC, points out the Mexican Peso has gained some ground since late August as China and the US announced a resumption of trade negotiations in October with a conciliatory tone resurfacing over the last few days. “Although the news has ignited a global risk-on sentiment and favours tactical short USDMXN positions, we maintain a high level of caution against this stance. Internal and external risks including lower GDP growth prospects, optimistic 2020 Budget assumptions, the pending USMCA ratification, the start of the US presidential race, Brexit, and the still uncertain US-China trade feud, make the MXN a risky bet for the rest of the year.”
They keep a 19.9 year-end forecast and see two additional 25bps rate cuts for the remainder of 2019. For the second quarter of 2020 they expect USD/MXN to trade at 20.4.
More Levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.