USD/MXN: Mexican peso steady around 22.75 after Banxico cuts rates

• Mexico: Central bank cuts key rate by 50bp as expected.
• USD/MXN turns flat after hitting the highest intraday level since May near 23.00.

The USD/MXN pair remained steady hovering near 22.75 following the decision of the Bank of Mexico to cut the key interest rate by 50 basis points. Earlier it rose to 22.99, reaching the highest intraday level in a month and then pulled back.

The move higher in USD/MXN was supported by a stronger US dollar across the board but as it the greenback lost strength, trimming gains. A quiet session across financial markets favored the retreat of the pair from one-month, however, it was limited by 22.70.

From a technical perspective, the bias continues to favor the upside in USD/MXN, but it failed again to post a daily close above 22.80. Such a breakout is needed to clear the way to more gains. The retreat under 22.80 offers signals that the pair could continue to trade in the 22.25/22.80 range.

Banxico: one more cut, more likely ahead

As expected, the Bank of Mexico cut the key rate from 5.5% to 5.0%. It was the ninth consecutive rate cut. The decision was unanimous and the statement offered no significant changes, leaving the door open to further cuts.

“The outlook component of the statement remains relatively unchanged, which gives us confidence in maintaining our current policy rate forecast of two further 50bp cuts, followed by two 25bp cuts, that will bring the policy rate to 3.50% by end of year”, explained analysts at TD Securities.