USD / MXN retreats to 20.50 from one-week highs

• The Mexican peso cuts part of Wednesday’s losses.
• Banxico’s decision is coming.

USD / MXN is falling on Thursday after rising hours ago to a week-long high at 20.68. The cross fell to the 20.50 area, but the upward pressure remains.

The strong rise in the dollar on Wednesday caused the USD / MXN to rise from 20.30 to 20.60. This involved a return to a higher lateral range. Now it could be expected to continue trading between 20.30 and 20.70, with intermediate support at 20.45.

Holiday in the US, Banxico decides

The Bank of Mexico it is expected to announce the fourth consecutive rate hike. The consensus points to an increase of 25 basis points, to 5%. The rise in inflation in Mexico is the key factor behind this tightening cycle.

There are analysts who suggest that even the rise may be higher. The bias towards adjustment is expected to remain for several more months, until the inflation situation calms down. Then the adjustment could even continue if this occurs when the Federal Reserve begins to raise interest rates.

The impact on the Mexican peso should not be very pronounced. Although if there are surprises with a higher rise, or due to inaction, there could be an increase in volatility.

Technical levels