USD/MXN rises back toward 19.10 after hitting 2-day lows at 19.03

• Mexican peso losses momentum against US Dollar late during the US session. 
• Risk aversion and a decline in crude oil prices weigh on MXN. 
• Banxico minutes show just one dissenter with the statement. 

The USD/MXN trimmed losses over the last hour, rising back to the 19.10 zone. Earlier today, amid a rally of most Emerging market currencies the pair dropped to 19.03, the lowest in two days and significantly below Wednesday’s high it reached near 19.30. 

The retreat ended today after the pair was unable to hold below 19.05. Over the last hours, the greenback rebounded as Wall Street turned negative and amid a collapse of more than 4% in crude oil prices. 

Banxico minutes: no surprises, 1 dissenter 

Yesterday the Bank of Mexico in its quarterly inflation report downgraded growth forecast for the current year and increased inflation projections. Today Banxico released the minutes of its latest meeting when it kept interests rate unchanged at 8.25%, the highest level in a decade. All members of the Board considered that the current stance is consistent with the convergence of inflation to its target within the time frame in which monetary policy operates. Nevertheless, most members expressed their concern about the persistence exhibited by core inflation. 

“Most members noted that the current environment poses a complex outlook and dilemmas for monetary policy. They argued that, although the weakening of economic activity and the widening of economic slack should mitigate inflationary pressures, there are still significant risks that could increase inflation”, the minutes mentioned. 

Like the previous meeting, Gerardo Esquivel-Hernández, was against the Monetary Policy Statement. “Although I agreed with the decision to keep the target interest rate level constant, I do not agree with the press release that informs about such decision. Specifically, I differ on both the restrictive tone that characterizes it as well as the conclusion reached with respect to the balance of risks to inflation”, said Esquivel. 

He considers that the recent change in the monetary policy stance of several developed countries as well as the marked deceleration of Mexico’s economic activity allowed for releasing a monetary policy statement with a more neutral tone. “I am particularly concerned that inflation expectations and inflation risk premia are increasing despite the relatively favorable behavior of inflation in 2019.”

He added that he differs with the emphasis given to the minimum wage increase as an upward risk to inflation. “After five months of this increase, there is no convincing evidence that this is in fact occurring.”