He USD/MXN has reacted downwards to the aggressive stance of the Central Bank of Mexico (Banxico). The entity has announced a rise in interest rates of 50 basis points, instead of the expected 25 points, which has caused a drop of 22 cents in the pair towards the 18.73 zone, a new six-day low.
Interest rates have jumped to 11% in the February meeting from the previous 10.5%, also exceeding the forecast of an increase to 10.75%. In its monetary policy statement, Banxico points out that “given the dynamics of underlying inflation, this time it is necessary to repeat the magnitude of the increase in the reference rate of the previous meeting”. “With this action, the monetary policy stance adjusts to the trajectory required for inflation to converge to its target of 3% within the forecast horizon,” the statement added. To conclude, the Governing Board points out that “given the monetary position that has already been reached and based on the evolution of the data, the increase in the reference rate at the next meeting may be of less magnitude“.
Pending USD/MXN traders to digest the news, the pair is trading above 18.75%, losing 0.99% daily.
USD/MXN Levels
The break of the zone of the last two days around 18.80/85 points to a further decline towards $18.64, floor of Friday, February 3. If this level is broken in the next few hours, look for a major support at 18.50 (minimum of the last four years registered on Thursday, February 2). Below that, losses could accelerate towards $17.93, April 2018 low, and $17.44, 2017 low.
Technical levels
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
