USD/MXN: Banxico cut leaves Peso exposed – ING

FXStreet Insights Team FXStreet

ING’s Chris Turner notes that Banxico’s 25 bp rate cut to 6.75% came with largely unchanged inflation forecasts and a projection of a return to target in early 2027. He argues that easing policy in the current environment is risky and suggests the Peso remains vulnerable, with scope for USD/MXN to correct higher on negative Middle East news.

Rate cut questions Peso resilience

"Banxico mildly surprised the market by cutting the policy rate 25bp to 6.75% yesterday. Somewhat surprisingly, its inflation forecasts were little changed since February (just 0.1/0.2% modest increases for headline and core CPI year-on-year rates). And it still forecast inflation returning to target at 3.00% in early 2027."

"Cutting rates in the current environment is a little dangerous and does suggest that Banxico is slightly less concerned about currency weakness than many other emerging market central banks."

"We had felt earlier this year that Banxico would not want to see USD/MXN trading well under 17.00 again. As a big EM beast and a proxy hedge for the EM complex, we think the peso remains vulnerable."

"Some poor news out of the Middle East could now see USD/MXN correct back up to the 18.50/70 region."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

AUD/USD sits near a one-month top, above 0.7000 amid fresh USD selling

AUD/USD holds above 0.7000 through the Asian session, trading near a one-month high touched earlier this Monday amid renewed US Dollar selling. US bond yields decline further amid a modest pullback in crude oil prices, capping the USD recovery from a three-week low. Moreover, bets for a November RBA rate hike support the Aussie, though upside seems capped ahead of the crucial two-day FOMC meeting, starting Tuesday.

USD/JPY struggles below 157.00 on weak USD; holds above one-month low ahead of Fed, BoJ meetings

USD/JPY attracts fresh sellers during the Asian session on Monday, stalling its recovery from the lowest level since September 18, touched Friday as a further decline in US bond yields weighs on the US Dollar. Meanwhile, the Japanese Yen benefits from a more hawkish BoJ, further weighing on the currency pair. The downside, however, seems limited as traders keenly await Fed and BoJ policy meetings later this week.

Gold consolidates near $4,000 as recovery remains fragile ahead of Fed decision

Gold (XAU/USD) consolidates modest gains on Monday after last week’s sharp decline pushed the metal to $3,975, its lowest level since August. A pullback in Oil prices offers support as traders react to diplomatic efforts to ease tensions in the Middle East.

Cardano's derivatives and on-chain data confirm bears in control

Cardano extends losses, trading below $0.202 after three consecutive weeks of more than 20% declines since early October. Selling pressure continues to build as weakening derivatives metrics, bearish on-chain signals and a deteriorating technical outlook point to further downside risks. Derivatives data shows a bearish bias for Cardano.

Flight to safety meets a high earnings bar as central bank week begins

Treasuries rallied again, equities are struggling, and central banks and earnings are on the horizon. Last week, US Treasuries rallied for a second consecutive week. This pushed 10s and 30s to 5% and 5.33%, respectively, flattening the curve even as Brent crude rallied about 7% to within striking distance of March peaks at US$119.50, and tech stocks posted a second straight week of losses.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.