- Mexican peso and other emerging market currencies under pressure against US dollar.
- Higher equity prices in Wall Street and a recovery in crude oil not helping MXN.
The USD/MXN gained momentum after the beginning of the American session and jumped from the 24.20 support area to 24.62m reaching the highest level since April 7. As of writing, it trades above 24.50, with a bullish bias.
The Mexican and most of the most traded emerging market currencies turned lower over the last hours versus the greenback. Concerns about the impact of the coronavirus continue to support the demand for the greenback.
On Tuesday the Bank of Mexico held an unscheduled meeting and decided to cut the key rate by 50 bps and announced measures “to foster an orderly functioning of financial markets, strengthen the credit channels and provide liquidity for the sound development of the financial system.”
Analysts at TD Securities explained that it was important to note that the decision was unanimous, “a dovish shift from the previous surprise decision, and suggests that further easing at a trajectory of 50bps per meeting is likely. Furthermore, there was no indication that the May meeting will be canceled in light of today’s actions. We expect a 50bp cut in May, and 50bps for the following three meetings. We also do not discount that possibility that Banxico will again act inter-meeting, on incoming economic data as it becomes available”.
Technical outlook
The USD/MXN continues to have a bullish bias that will likely hold as long as price remains above the uptrend line from the April low that stands at the moment at 23.80. On the upside, around 24.65 is the next resistance that protects the next one slightly below 25.00.
Share
