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  • Mexican peso among worst performers over the last five days.  
  • USD/MXN accelerated to the upside, having the best week in a month.  

The USD/MXN broke to the upside after moving for hours in a tight range and jumped to 19.73, reaching the highest level since September 6. Near the end of the week it is hovering slightly above 19.70, consolidating a weekly gain of 30 cents.  

The Greenback is having the best performance again the Peso in about a month. USD/MXN strengthened on Wednesday after breaking a key technical resistance at 19.50. The short-term trend now points to the upside.  

Outlook after Banxico  

Yesterday the Bank of Mexico cut the key interest rate by 25bps as expected. Some analysts considered it could lowered by 50bps taking into account the slowdown in inflation and Fed’s easing outlook. “Banxico sounded less unconstructive on economic dynamics while implying the importance for sustained convergence in inflation to target, CPI-suppressive factors ebb from non-core aggregates. A dovish dissent by two policymakers for a 50bp cut raises some degree of risk to MXN should Banxico begin easing more rapidly than the Fed, in the absence of a portfolio flow-attracting improvement in EM economic fundamentals“, explained Sacha Tihanyi, Deputy Head of Emerging at TD Securities.  

They continue to see Banxico easing at the rate of the Fed for now, until inflation expectations fall further and core metrics (along with wages) responds to the output gap. “This slightly dovish outcome on the meeting reinforces our bearish MXN view and look for a drift up to 20.50 through the next three months.“