- Mexican peso continues to slide against US Dollar.
- Federal Reserve keeps rates unchanged as expected; next week is Banxico meeting.
- Crude oil tumbles 1.80%, falls to lowest since March, adding more pressure to MXN.
The Mexican peso dropped sharply against the US Dollar on Thursday. The USD/MXN rose more than 3% from yesterday’s low making a significant reversal that could signal a test of October highs.
The pair opened the day around 19.85 and it moved all day with a bullish bias. The move to the upside gained momentum during the US sessions. It peaked at 20.21 following the FOMC statement and amid a rally of the US dollar across the board. The greenback also rose sharply on Thursday against other emerging market currencies. The Fed kept rates unchanged as expected and market participants see a rate hike in December and three to four rate hikes in 2019.
From a technical perspective, the USD/MXN reversed dramatically and it was at 20.15. A daily close on top would expose the next resistance seen at 20.30. If it continues to rise, attention would turn to 20.50. On the flip side, a slide under 19.90 is needed to ease the bullish pressure.
Inflation slows but maybe not enough
Data released today showed that inflation eased in October in Mexico but still remains well above the central bank’s target. The Consumer Price Index rose 0.52% in October and 4.9% over the last 12 months (down from 5.02% of the previous month).
Despite the slowdown in inflation, the Bank of Mexico is still seen raising rates by some analysts. The recent depreciation of the peso and current uncertainties added pressure to Banxico officials to rise the key rate to 8% from the current level of 7.75%.
IMF on Mexico
In a report, the International Monetary Fund, mentioned that the incoming administration lead by Andres Manuel López Obrador will inherit an economy with very strong fundamentals and policy frameworks that has exhibited resilience in the face of a complex external environment but “still confronts significant challenges—namely to strengthen growth while reducing poverty and inequality—and has yet to win the fight against corruption and crime.”
The IMF expressed that uncertainty associated with the global economic environment and the policies of the incoming administration persists. “Prospects hinge on the steadfast implementation of structural reforms while ensuring continued macroeconomic stability”. It mentioned that the state oil company, Pemex, should strengthen it financial situation as “a prerequisite to contemplating new investments in refining.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD stabilizes near 1.0800 as trading action turns subdued
EUR/USD holds steady near 1.0800 on Thursday and remains on track to end the day in negative territory following upbeat macroeconomic data releases from the US. The action in financial markets turn subdued as trading volumes thin out heading into Easter holiday.
GBP/USD extends sideways grind above 1.2600
GBP/USD fluctuates in a narrow channel above 1.2600 on Thursday. The better-than-expected Initial Jobless Claims data from the US and the upward revision to the Q4 GDP growth help the USD stay resilient against its rivals and limits the pair's upside.
Gold pulls away from daily highs, holds above $2,200
Gold retreats from daily highs but holds comfortably above $2,200 in the American session on Thursday. The benchmark 10-year US Treasury bond yield stays near 4.2% after upbeat US data and makes it difficult for XAU/USD to gather further bullish momentum.
XRP price falls to $0.60 support as Ripple ruling doesn’t help Coinbase lawsuit against SEC
XRP programmatic sales ruling by Judge Torres was completely rejected by another US Court that ruled in favor of the SEC in a lawsuit against Coinbase.
Portfolio rebalancing and reflation trades emerge into Q2
Yesterday’s price action pointed at a possible end-of-quarter portfolio rebalancing as the session saw the laggards of the quarter like Apple and Tesla gain, and the stars like Microsoft and Nvidia retreat.