Mexico: Central bank rises rates to 7.75%, MXN extends gains

Bank of Mexico rises rates to 7.75% as expected after 2 months of MXN depreciation.
USD/MXN extends bearish correction after the decision, heads for the lowest close since June 4.

Matías Salord FXStreet

As most expected, the Bank of Mexico rose the key interest rate by 25bp from 7.5% to 7.75%, the highest level since 2009. The decision was unanimous.

Banxico warned that if necessary would adjust the monetary policy in a timely and firm manner to reach the 3% inflation target and in order to keep inflation expectations anchored.

Regarding the “trade war”, the central bank expects a limited impact from the tariffs between the US and Mexico.

USD/MXN gains momentum after rate hike

The Mexican peso lost 15% from mid-April to mid-June against the US Dollar amid tensions across emerging market. The quick and sharp depreciation of the peso is seen as the main reason for today’s actions.

USD/MXN peaked last week slightly below 21.00 and since then it has been moving with a bearish bias. Today is falling for the fifth-day in-a-row and after Banxico’s statement printed a fresh 2-week low at 20.23.

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

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