The Mexican Peso Prepares for Bank of Mexico Policy Meeting
The Mexican Peso (MXN) remains steady in its major pairs, awaiting the upcoming Bank of Mexico (Banxico) policy meeting scheduled for Thursday. This event is crucial for the currency’s performance this week, with traders closely monitoring the central bank’s decision regarding interest rates.
Expectations for Interest Rate Cut
- The consensus among economists is for Banxico to cut interest rates by 0.25% to 10.50%.
- A recent survey by Bloomberg revealed that 20 out of 25 economists anticipate a 25 bps cut, while only one expects no change.
- There is a growing speculation for a larger 50 bps cut following the release of Mexico’s inflation data, which showed a deeper-than-expected slowdown in September.
Factors Influencing Banxico’s Decision
- Recent data indicating a 3.8% year-on-year expansion in Mexico’s economic activity for July may influence Banxico to opt for a more cautious approach, favoring a 25 bps cut over a 50 bps reduction.
- At the August meeting, Banxico implemented a 0.25% interest rate cut, with a close call vote of three members in favor versus two against, indicating a likelihood of a smaller rate cut this time.
Key Insights: Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics, projects another 25 bps cut based on the fall in Mexican inflation, while the market anticipates a higher risk of a 50 bps cut over the next few months.
Technical Analysis: USD/MXN Trends
USD/MXN has shown an upward trend, reaching resistance at 19.52 before retracing. The pair is currently within a rising channel, indicating a potential short-term uptrend.
USD/MXN Daily Chart
The 50-day Simple Moving Average provides support at the channel’s base, with a close above 19.53 signaling a short-term uptrend for the pair.
Banxico FAQs
Here are some frequently asked questions about the Bank of Mexico (Banxico) and its role in shaping monetary policy:
- What is Banxico’s mission? Banxico aims to preserve the value of the Mexican Peso and maintain low and stable inflation within target levels.
- How does Banxico influence monetary policy? The central bank uses interest rates to guide monetary policy, adjusting them based on inflation levels and economic conditions.
- How does Banxico coordinate with the US Federal Reserve? Banxico’s decisions are often influenced by the Fed’s policies, with the central bank reacting to and sometimes anticipating Fed measures.