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Mexican Peso rebounds to 18.24 vs. US Dollar following Banxico’s decision to maintain 11.00% rate. Decision aligned with recent inflation data, targeting 3% inflation by Q4 2025. Inflation risks heightened by service sector, cost pressures, Peso fall and geopolitical tensions. The Mexican Peso recovered ground against the US Dollar and rallied more than 1% on Friday after the Bank of Mexico (Banxico) decided to keep rates unchanged due to “idiosyncratic factors” and the Peso’s depreciation following the June 2 general election results. Although the USD/MXN trades with losses of 0.73% at 18.30 during the day, ends the week and month with gains of 1.19% and 7.72%, respectively. Banxico left a lifeline to the battered Peso on Thursday, holding rates at 11.00% after inflation reaccelerated, according to June’s mid-month inflation data. The Mexican institution expects headline inflation to converge to the bank’s 3% target by Q4 2025 and acknowledged that inflation risks are skewed to the upside due to high services inflation, cost pressures, Mexican Peso depreciation and geopolitical conflicts. Across the border, the US Federal Reserve’s (Fed) preferred inflation gauge came as expected by the consensus, showing an improvement in headline and core Personal Consumption Expenditures (PCE) Price Index. The data failed to underpin the Greenback, which remains pressured, losing some 0.16% as revealed by the US Dollar Index (DXY). Therefore, the USD/MXN might continue on the back foot toward the remainder of the day as sellers eye an April 19 high of 18.15. Daily digest market movers: Mexican Peso strengthens after Banxico hold Banxico’s decision was not unanimous and was perceived as dovish as Deputy Governor Omar Mejia Castelazo opted for a quarter of a percentage rate cut. Mexico’s central bank monetary policy statement highlighted the Governing Board expects the disinflation process to evolve and added that “Looking ahead,…

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Filed under: News - @ June 29, 2024 7:18 pm