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  • US Dollar keeps rising against Emerging market currencies, MXN far from the worst.  
  • Mexican data: April mid-month inflation cames above expectations.  

The USD/MXN pair rose to 19.04 earlier today reaching the highest level since April 8 and then pulled back. At the moment, is hovering around 19.00, showing some limitations above 19.00 but with the bullish tone intact.  

The main driver has been US Dollar strength. The greenback is rising again versus emerging market currencies, gaining 3% versus the Argentinean peso, 1.40% vs. Brazilian real and 1.15% vs. Shout African Rand. The rally of the USD, takes place despite record high equity prices in Wall Street and amid steady commodity prices. The risk aversion sentiment toward EM currencies prevails.  

Mexico: Inflation rebounds  

Data released today showed that inflation accelerated during the first half of April. The mid-month CPI rose 4.38% from a year ago, above the 4.20/25% expected by market consensus. The CPI is back above the central bank’s target. Compared with March, prices fell by 0.03%.

The recent move to the upside in USD/MXN and CPI data reduced expectations that the Mexican central bank could begin cutting interest rates soon. Currently the key rate stands at 8.25%, the highest in 10 years.  

USD/MXN Levels to watch

A consolidation on top of 19.00 (horizontal level and 20-day moving average) could point to further gains and potentially target 19.20. The next strong resistance. On the flip side, if USD/MXN fails to hold on top of 19.00 it will likely continue to trade sideways in the 18.80/19.00 range. Under 18.80, the 2019 lows at 18.73/74 would be exposed.