USD/MXN drops to fresh 4-month lows ahead of Banxico

The Mexican peso is among the top performers on Wednesday in the currency market ahead of tomorrow’s Bank of Mexico meeting. USD/MXN is falling almost 1.50% today. The pair traded momentarily above 19.00 earlier today but then bounced to the downside. Recently reached 18.73, hitting the lowest level since the US Presidential elections (Nov 8/9). 

Currently, it trades at 18.74, headed toward the lowest close in months. The bearish tone prevails in the pair, that since mid-March accelerated the downside, following the break of the 19.40 technical barrier. 

Banxico eyed

On Thursday, most analysts expect Banxico to raise rates by 25 basis points. Rising inflation pushed the central bank to start a tightening cycle. Some analysts expect no move tomorrow taking into account that the peso has strengthened since January. Back then USD/MXN reached record highs levels on top of 22.00. 

Analysts from TDS, expect a 25bp rate hike but they do not discount the possibility that Banxico would elect to not hike rates. “Though we believe this is ill-advised as it would be better policy execution and communication strategy (that would enhance market confidence) to hike 25bps more, and then change the communication strategy to indicate an end (or near to an end) in the hiking cycle”.

Banxico seen raising rates by 25 bp – TDS