Analyzing the Mexican Peso Ahead of Key Inflation Data and Banxico Meeting
The Mexican Peso (MXN) is showing strength in its major pairs as investors await crucial inflation data and the upcoming Bank of Mexico (Banxico) policy meeting. These events are expected to have a significant impact on the Mexican currency’s performance in the coming days.
Factors Influencing the Mexican Peso
- Inflation Data Release: The Instituto Nacional de Estadística Geografía e Informática (INEGI) is set to release the 1st half-month inflation and core inflation figures for September, which could sway Banxico’s decision.
- Banxico Policy Meeting: Banxico is expected to announce a 25 basis points (bps) rate cut during its upcoming meeting on Thursday, based on a recent Bloomberg survey.
- Analysts’ Expectations: While some analysts anticipate a rate cut to support the weakening Peso, others believe that inflation concerns may deter Banxico from lowering rates further.
Insights from Financial Experts
Christian Lawrence, Senior Cross-Asset Strategist at Rabobank, predicts a 25 bps rate cut by Banxico, citing improvements in inflation data. However, concerns about the Peso’s depreciation may influence the central bank’s decision-making process.
Dr. Win Thin, Global Head of Markets Strategy at Brown Brothers Harriman (BBH), expects another rate cut in light of ongoing disinflation trends and market expectations for further easing over the next year.
Technical Analysis of USD/MXN Pair
The USD/MXN pair is showing signs of a short-term uptrend within a long-term rising channel, supported by bullish momentum and the Relative Strength Index (RSI) indicating underlying strength in the market.
Key Takeaways
- USD/MXN is in a medium and long-term uptrend, with potential for further upside movement.
- A close above 19.53 on a 4-hour basis would confirm a bullish short-term uptrend for the pair.
- The RSI’s steep rise since September 18 suggests bullish convergence and a positive outlook for USD/MXN.
Understanding Banxico FAQs
The Bank of Mexico, also known as Banxico, plays a crucial role in maintaining the value of the Mexican Peso and setting monetary policy to ensure low and stable inflation levels. Key points to note include:
- Banxico’s main tool for guiding monetary policy is setting interest rates based on inflation levels.
- The central bank’s decisions are influenced by the US Federal Reserve’s policies and global economic conditions.
- Banxico meets regularly to assess economic conditions and make informed decisions to support the Mexican economy.