USD/MXN ticks higher after Banxico Minutes; looks to Powell's speech for fresh impetus

USD/MXN edges higher on Friday, though the uptick lacks any follow-through buying.
Mexican Peso weakens slightly after Banxico Minutes indicated more interest rate cuts.
Sustained USD buying also supports the pair ahead of Fed Chair Jerome Powell’s speech.

Haresh Menghani FXStreet

The USD/MXN pair attracts some dip-buying near the 18.7375 area during the Asian session on Friday, and for now, seems to have snapped a two-day losing streak. Spot prices, however, lack bullish conviction and currently trade around the 18.7665 zone, up just over 0.05% for the day.

The Mexican Peso (MXN) edges lower after Minutes from Banco de Mexico's (Banxico) August 7 policy meeting revealed a split vote within the board to reduce rates by 25 basis points (bps) to 7.75%. Moreover, the Minutes suggested further adjustments remain possible despite inflation concerns. This, along with some follow-through US Dollar (USD) buying, acts as a tailwind for the USD/MXN pair.

In fact, the USD Index (DXY), which tracks the Greenback against a basket of currencies, is prolonging its weekly uptrend and testing its highest level since August 5 amid diminishing odds for a more aggressive policy easing by the Federal Reserve (Fed). Traders, however, are still pricing in a greater chance that the US central bank will resume its rate-cutting cycle at its next meeting in September.

Furthermore, the CME Group's FedWatch Tool indicates the possibility of at least two 25-basis-point rate cuts by the year-end. Hence, Fed Chair Jerome Powell's speech at the Jackson Hole Symposium later today will be scrutinized closely for cues about the future rate-cut path. This, in turn, will play a key role in influencing the USD price dynamics and provide a fresh impetus to the USD/MXN pair.

From a technical perspective, spot prices remain confined in the weekly range. This further makes it prudent to wait for strong follow-through buying beyond the trading range hurdle, around the 18.8670-18.8675 area, before positioning for a meaningful appreciating move. On the flip side, weakness below the 18.6785-18.6780 zone, or the weekly low, will be seen as a key trigger for the USD/MXN bears.

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Fed's Chair Powell speech

Jerome H. Powell took office as a member of the Board of Governors of the Federal Reserve System on May 25, 2012, to fill an unexpired term. On November 2, 2017, President Donald Trump nominated Powell to serve as the next Chairman of the Federal Reserve. Powell assumed office as Chair on February 5, 2018.

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