- Emerging market currencies get respite from bourses.
- Mexico: Another rise of Banxico is coming.
- USD/MXN remains below 20.30.
USD/MXN is falling on Tuesday, while stocks on Wall Street are up sharply snapping a three-day losing streak. The pair trades at 20.27, the low, moving away from the one-week high reached hours ago at 20.43.
The dollar on Tuesday is losing momentum but is still holding firm. The rise in stocks coupled with a decline in Treasury yields gave it strength.
Emerging market currencies welcome the best mood, although not all manage to bounce. The Mexican peso stands out on Tuesday, two days before the meeting of the Bank of Mexico, which is expected to raise interest rates again. Prior to that event, retail inflation figures will be published in the US on Wednesday.
“The market is already pricing in a substantial increase in policy rates in 2022, suggesting real rates will tend to rise going forward. We agree and expect another 50bp hike from Banxico this week and four more consecutive hikes until November. This will help offset rising inflation (and gradually bring real rates into neutral or positive territory), while offsetting future Fed tightening,” analysts at TD Securities explained.
They see USD/MXN heading to 19.75/80 in the third and fourth quarters, to then rise above 20 and 21 in the first and second half of 2023, respectively.
Technical levels
Source: Fx Street
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