• 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.

USD/MXN Daily chart

USD/MXN

Overview
Today last price 17.7212
Today Daily Change 0.1254
Today Daily Change % 0.71
Today daily open 17.5958
 
Trends
Daily SMA20 17.8286
Daily SMA50 18.136
Daily SMA100 18.4324
Daily SMA200 19.1208
 
Levels
Previous Daily High 17.6917
Previous Daily Low 17.484
Previous Weekly High 17.8405
Previous Weekly Low 17.5344
Previous Monthly High 18.4018
Previous Monthly Low 17.9329
Daily Fibonacci 38.2% 17.6123
Daily Fibonacci 61.8% 17.5633
Daily Pivot Point S1 17.4893
Daily Pivot Point S2 17.3828
Daily Pivot Point S3 17.2816
Daily Pivot Point R1 17.697
Daily Pivot Point R2 17.7982
Daily Pivot Point R3 17.9046

 

 

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