The Mexican peso is among the worst performers on Wednesday
The Mexican peso is among the worst performers on Wednesday. It weakened after USD/MXN broke above 18.00 and jumped to 18.16, reaching the highest level since July 7. At the moment it trades at 18.10, validating most of the day’s gains.
The rally is taking place amid a decline in commodities prices, lack of risk appetite in emerging markets and ahead of the Bank of Mexico meeting. The US dollar is rising since the beginning of the week against Latin American currencies.
Yesterday USD/MXN approached the key resistance seen at 18.00 and today broke decisively on top. It rose to the first target at 18.15; a break above could clear the way to the next resistance seen at 18.35 followed by the 18.45/50 area. On the downside, if the pair fails to hold on top of 18.00, the upside pressure would ease, favoring a bearish correction.
Banxico expected to remain on hold
Tomorrow the central bank of Mexico will announce its decision. Market analysts expected no change in the key rate.
“We fully expect Banxico to leave the policy rate unchanged at 7% on Thursday 28th September. This will mark the third consecutive ‘on-hold’ decision from Banxico and we expect to see a lot more of those before the Bank starts cutting rates. We think that will happen after the July 1st Presidential elections. That said, a look at the front-end of the rates curve does point to more than a 60% chance of a cut being by year-end”, wrote analysts from Rabobank.