- The Banxico Board sees an increase in the economic margin and downward risks in inflation, reinforcing the expectations of more rates cuts.
- The majority indicated an orderly trade in the MXN and liquidity conditions in improvement despite external volatility.
- The USD/MXN could try 20.00 if the support is broken in 20.30; The upward risk only resumes above 20.50.
On Thursday, April 10, the Bank of Mexico (Banxico) published the last minutes of its meeting, in which all members of the Board affirmed that the Mexican economy is slowing down in the midst of an evolving disinflation process, which paves the way for greater relief.
Outstanding comments of the Banxico meeting:
The Board estimates that, in the face of the future, it could continue to calibrate the monetary policy position and consider adjustments in similar magnitudes.
The majority of the members of the Board said that the economy is expected to show an increase in the margin.
The majority of the members of the Board said that the MXN trade conditions were ordered and even showed improvements during the period.
The majority said that the balance of risks for economic activity is biased down.
The majority indicated that the downward risks for inflation have gained relevance.
The majority of the Board said that the expected weakness of economic activity and the greatest margin conditions will contribute to the continuation of the disinflation process.
A Member of the Board said that the preliminary estimate for February suggests that the contraction will extend to that month.
A stage of high and permanent tariffs on all imports from the US from Mexico is unlikely to materialize.
USD/MXN price forecast: Technical Perspectives
Although the USD/MXN continues to have an upward trend, a fall below the 20.30 area could pave the way for more losses. The next key support level is found in 20.00, followed by the simple mobile average (SMA) of 200 days in 19.83. If it exceeds, the next stop would be 19.50. On the contrary, a bullish continuation is glimpsed if buyers push the torque beyond the 20.50 area, with the 21.00 figure below.
BANXICO FAQS
The Bank of Mexico, also known as Banxico, is the central bank of the country. Its mission is to preserve the value of the Mexican currency, the Mexican weight (MXN), and set the monetary policy. For this, its main objective is to maintain low and stable inflation within the target levels – in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%.
The main Banxico tool to guide monetary policy is the fixation of interest rates. When inflation is above the goal, the bank will try to control it by raising the rates, which makes the debt of homes and companies more expensive and, therefore, cools the economy. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN. The rate differential with the dollar, or the way in which Banxico is expected to set interest rates compared to the United States Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year and its monetary policy is very influenced by the decisions of the United States Federal Reserve (Fed). Therefore, the decision -making committee of the Central Bank usually meets a week after the Fed. In this way, Banxico reacts and sometimes anticipates the monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised the rates, Banxico first did it in an attempt to reduce the possibilities of a substantial depreciation of the Mexican weight (MXN) and avoid capital outputs that could destabilize the country.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
