USDMXN PRICE OUTLOOK: MEXICAN PESO EYES BANXICO RATE DECISION – TALKING POINTS
- The Mexican Peso eyes a monetary policy update and interest rate decision from Banco de Mexico, or Banxico, as central banks around the world provide stimulus
- USDMXN[1] price action has slid so far this month, but the currency pair remains bid and could continue climbing if Banxico cuts rates by more than expected or USMCA risk resurfaces
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The Mexican Peso will likely be in focus during Thursday’s trading session with Banxico – Mexico’s central bank – set to release its latest interest rate decision and monetary policy update at 18:00 GMT. Mexico’s policy interest rate currently sits at 8.00% after the August Banxico meeting revealed a 25-basis point cut and the market consensus calls for another rate cut to be announced tomorrow. [3]
I pointed out at the end of July that USDMXN rate outlook hinted at higher spot prices back when the Mexican Peso was trading around 19.030 against the US Dollar[5]. USDMXN subsequently surged well above the 20.000 handle as the most liquid emerging market currency pair was driven higher by gains in the greenback, which solidified a topside breakout from its multi-year wedge. Spot USDMXN prices have since receded back toward the 19.500 mark, however, though the Mexican Peso could soon face renewed selling pressure if Banxico favors more aggressive monetary policy action. [4][6]
USDMXN RISK REVERSAL POINTS TO WANING BULLISH BIAS AHEAD OF BANXICO RATE DECISION
Yet, according to USDMXN risk reversals, which have declined significantly since the beginning of the month, point to the fading bullish bias by forex traders headed into
