- Banxico leaves interest rates unchanged at 11.25%, ending the hiking cycle initiated in June 2021, causing a muted reaction in the USD/MXN.
- Banxico’s statement indicates a disinflationary process underway, yet it acknowledges a complicated and uncertain inflationary outlook with potential upside risks.
- The USD/MXN exchange rate experiences limited reaction, maintaining a position above the 17.7000 figure, with the 18.0000 level eyed as the next key resistance.
The Mexican Peso (MXN) depreciates sharply after the Bank of Mexico’s (Banxico) decision to keep rates unchanged at 11.25%, ending its hiking cycle in June 2021 after 700 basis points of increases. At the time of writing, the USD/MXN is trading volatile at around the 17.70000 – 17.7500 area, with US Dollar (USD) buyers eyeing the 18.000 psychological barriers.
Summary of the monetary policy statement by Banxico
Bank of Mexico based its decision even though core inflation has shown some resistance to decline, but commented that several central banks halted their reference rates. Banxico assessed the global economic growth as tilted to the downside but commented that inflation in Mexico has decreased since the last monetary policy meeting, emphasizing that core inflation decreased more “markedly than in previous months.”
The Governing board evaluated the magnitude and diversity of the inflationary shocks and considered the economy has started to undergo a disinflationary process, given that many pressures have eased. The board will monitor inflationary pressures and “estimates that the inflationary outlook will be complicated and uncertain throughout the entire forecast horizon, with upward risks.”
The Governing Board finalized the statement saying they will maintain the reference rate at its current level for an extended period.
Must read: Mexico: After 15 consecutive hikes, central bank keeps key rate unchanged at 11.25%
USD/MXN Reaction
The USD/MXN reaction was muted, with the exchange rate holding above the 17.7000 figure after clashing earlier in the day with the 20-day Exponential Moving Average (EMA) at 17.7682, limiting the rally on the USD/MXN. Above that level, the psychological 18.0000 figure emerges, ahead of the 50-day EMA at 18.0332
On the downside, any drops below the May 17 high of 17.6914 could open the door to retesting lower levels, at around 17.6000, followed by the lows of July 2017 at 17.4500.
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
AUD/USD holds above 0.6500 in thin trading
The Australian Dollar managed to recover ground against its American rival after AUD/USD fell to 0.6484. The upbeat tone of Wall Street underpinned the Aussie despite broad US Dollar strength and tepid Australian data.
EUR/USD comfortable below 1.0800 lower lows at sight
The EUR/USD pair lost ground on Thursday and settled near a fresh March low of 1.0774. Strong US data and hawkish Fed speakers comments lead the way ahead of the release of the US PCE Price Index on Friday.
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.
Google starts indexing Bitcoin addresses
Bitcoin address data is live on Google search results after users realized on Thursday that the tech giant started indexing Bitcoin blockchain data. However, mixed reactions have followed the tech giant's reversed stance on the cryptocurrency.
A Hollywood ending for fourth quarter GDP
The latest revisions put Q4 GDP at 3.4%, the second fastest quarterly growth rate in two years. Much of the upside was attributable to stronger consumer spending, yet fresh profits data affirmed it was a good quarter for the bottom line as well with profits up by the most since the Q2-2022.