- Firm Mexican peso after raising rates in Banxico.
- Improvement on Wall Street helps emerging currencies.
- USD/MXN cannot break above 20.45 and is pulling back towards 20.15.
USD/MXN is retreating for the third day in a row and recently fell as low as 20.15, the lowest since Monday. This occurs the day after Banxico’s rate hike.
firmer mexican peso
The Bank of Mexico on Thursday raised the benchmark interest rate by 50 basis points from 6.50% to 7.00%. Of the five members of the board, four voted in favor and one of them, Irene Espinosa, asked to raise the rate by 75 points. In this way, Banxico has already accumulated four consecutive increases of 50 points.
The Mexican peso rose modestly after the decision, which was as expected, although certain mentions of the possibility of a bigger rally may have provided extra support. A higher rate of adjustment is not expected at the moment, but it is expected that they will continue to rise considering the inflation levels in Mexico and that the Federal Reserve will continue to raise rates.
Wall Street’s rebound from the close, which extends into Friday, is helping to improve the face of emerging market currencies. Tensions are still predominant, as is volatility, which may favor sharp movements in the financial markets.
No power with 20.45
The USD/MXN decline occurs after failing to break above 20.45 after three consecutive attempts. The subsequent decline is bringing price below 20.25 and the 20 moving average on Friday. If this decline is confirmed, further declines could be expected, initially testing the uptrend line at 20.10 area. Below then appears the May low at 19.98.
Technical levels
Source: Fx Street
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