USD/MXN keeps rising above 19.00 ahead of Fed and Banxico

• Mexican peso weakens ahead of Banxico. 
• USD/MXN rises further above 19.00, eyes 19.30.

The Mexican peso is among the worst performers on Tuesday, ahead of the FOMC and Banxico meetings. USD/MXN is rising for the fifth day out of the last six trading days. Yesterday it closed slightly above 19.00 and today rose further. It peaked at 19.22, reaching the highest level since November 16. It was hovering around 19.16, up 3% over the month. 

USD/MXN is back near the key 19.30 resistance area. A consolidation on top would open the doors to more gains with a potential target at 19.50. To the downside, a slide back under 18.90 would remove the short-term bullish pressure. Below support levels might be seen at 18.70 and 18.50. 

Weak data ahead of a critical Banxico meeting 

Today, in Mexico, industrial production data showed an unexpected decline in October of 0.1% that follows a slide of 0.4% in September. The data together with the slide in crude oil prices and a stronger US dollar boosted USD/MXN on Tuesday. 

Tomorrow, the Federal Reserve will announce its decision on momentary policy. A rate hike is expected and it could have a decisive impact on Thursday’s Bank of Mexico meeting. The Mexican central bank is now expected to raise rates, after the depreciation of the peso during the last weeks and also following a rebound in inflation. The meeting will be presided by the new governor, Díaz de León. If the Fed raises, most analysts expect also a hike from Banxico of 25bp to 7.25%. 

On Thursday, besides Banxico, the central banks of Peru, Chile and Colombia will also decide on rates. No change is expected at any of those banks and last week the Central Bank of Brazil dropped the key rate to 7%. That shows how Banxico is diverging. If the Mexican central bank raises rates, it will be the first time that Mexican benchmark rate surpasses Brazil’s rate.