Rate cut is as expected

The Bank of Mexico cut their overnight rate to 7.75% from 8%. This was as expected although there were some analysts who are looking for a larger 50 basis point cut.

  • the decision was not unanimous with two board members voting to cut by 50 basis points
  • balance of risks continue with a downward bias
  • though economic growth remains stagnant it is expected to recover over the rest of the year
  • will follow FX impact on CPI, Fed posture, economic slack
  • Mark uncertainty persists about both upward and downward risks that could influence inflation
  • will pay special attention to uncertainty, pass-through of exchange rate on prices, relative monetary policy between US Fed and Mexico
  • current climate continues presenting important risks to the macroeconomic conditions of Mexico
  • it is particularly important to maintain a prudent, firm monetary policy and promote measures that encourage investment certainty
  • uncertainty persists related to the US – Mexico trade relationship

The USDMXN fell on the news but has since seen a recover.

Looking at the 4-hour chart below, the USDMXN reached up to the 200 bar MA on the 4-hour chart at the high today at 19.668 (the high reached 19.666). yesterday, the price moved above its 100 bar moving average currently at 19.49113. So the pair remains above the 100 bar MA but below the 200 bar MA (at 19.4911 and 19.668 respectively).

USDMXN on the four hour chart