- USD/MXN with bearish bias, tests support at 20.10.
- Mexican peso among the best performers in the week.
- Banxico raises the reference rate to 9.25%.
USD/MXN is falling on Friday and hit a one-week low at 20.09. The Mexican peso remains firm despite the weakness in the equity markets and the rebound of the dollar.
Banxico meets expectations
The Bank of Mexico raised the benchmark interest rate on Thursday by 75 basis points as expected to 9.25%. The rise in rates by the Federal Reserve and unrelenting inflation in Mexico led Banxico to raise rates for the eleventh time in a row, and the third by 75 basis points. The level of the rate reached the maximum since it began to be used as a reference in 2008.
The Governing Board affirmed that inflation has been higher than expected and they see that it will take longer to return to the desired levels. They revised the expected peak to 8.6% and stated that it would remain at that level for the remainder of the year. They see the risks to growth biased to the downside.
Banxico indicated that the magnitude of the next increases will depend on the “prevailing circumstances”.
weekly performance
USD/MXN is on track to end the week with a very different tone than when it started. On Wednesday it had reached 20.57, but that same day a sharp reversal began that is bringing it towards 20.00.
A return above 20.20 could strengthen the dollar again. The key to a firmer rally remains a daily close above 20.45.
On the board, the Mexican peso is among the best performers, showing a slight rise against the dollar, something unthinkable just three days ago when global markets were collapsing and putting downward pressure on all emerging market currencies. October will continue to present challenges for the Mexican peso, which is on track to end September at the same level it had closed in August.
Technical levels
Source: Fx Street
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