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  • Mexican peso gains for the second-day in-a-row against the US dollar.  
  • Greenback drops sharply after Fed’s Chairman comments.  
  • Banxico to release minutes on Thursday, cuts economic forecast for 2019.

The USD/MXN pair continued to correct lower from multi-month highs on the back of an improvement in Mexican assets and also of a sharp slide of the US dollar. It traded momentarily above 20.50 and then moved all day with a bearish bias.  

During the US session dropped under 20.40 and tumbled to 20.21reaching a 6-day low and approached last week lows and also the 20-day moving average (20.21). Near the end of the day, USD/MXN trades at 20.23, having the best performance in weeks.  

The greenback tumbled across the world after the release of Fed’s Powell speech. He mentioned that the policy rate was just below the neutral rate. Market expectations for rate hikes in 2019 dropped dramatically and pushed the greenback to the downside and Wall Street to the upside.  

Banxico lowers growth expectation for 2019  

The Bank of Mexico cut its economic growth forecast for 2019 amid uncertainties over President-elect Andres Manuel Lopez Obrador policies. AMLO’s government officially starts on Saturday. In its quarterly inflation report, Banxico forecast growth from 1.7 to 2.7% for 2019, down from the 1.8/2.8% of the previous release.

Equity prices in Mexico rose today and extended the recovery after falling more than 4% on Monday to the lowest since 2014, on fears about the future of the pensions funds. Two weeks ago were comments regarding banking regulations, the fact that triggered a decline in equity prices and in October, the announcement of the cancellation of the ongoing construction of the new international airport.  

The future Treasury Secretary, Carlos Urzua, offered on Monday a press conference. He denied a nationalization of the pension funds and also reaffirmed central bank independence. Yesterday he presented budget targets showing no surprises and helped to improve the demand for Mexican assets.  

On Thursday, the Bank of Mexico will release the minutes from its latest meeting when it rose the key interest rate to 8.0%, the highest level in a decade.