- The Banxico Council sees an increased risk associated with economic loose and a decrease in inflation, which strengthens the expectations of higher foot reductions.
- Most recorded the tidy MXN trade and improving liquidity conditions despite external variability.
- USD/MXN could test 20.00 if support at 20.30 breaks; The risk of growth will resume only above 20.50.
On Thursday, April 10, Banco de Mexico (Banxico) published the last minutes of meetings, in which all board members stated that the Mexican economy releases in connection with the evolving process of disinflation, which paves the way to further alleviating.
Key quotes of the Banx meeting:
The Council estimates that looking into the future can continue the calibration of a monetary policy attitude and consider adapting similar sizes.
Most members of the management board stated that the economy is to demonstrate more slack.
Most board members claim that MXN trade conditions remained ordered and even showed improvements during this period.
Most stated that the risk balance for business activity is biased in minus.
Most indicated that the risk of inflation defects gained importance.
Most of the board said that the expected weakness of economic activity and greater loose conditions will contribute to the continuation of the disinflation process.
One board member said that Flash estimation for February suggests that the contraction will expand for this month.
The scenario of high and indefinite tariffs for all US imports from Mexico is unlikely to materialize.
USD/MXN price forecast: technical perspectives
Although USD/MXN remains biased, a decrease below the 20.30 area can pave the way for further losses. Another key level of support lies at 20.00, followed by a 200-day straight movable (SMA) average at 19.83. If it is exceeded, the next stop would be 19.50. And vice versa, the stubborn continuation is approaching if the buyer moves the pair next to the 20.50 area, with a figure of 21.00.
BANSYK FAQ
The Mexico Bank, also known as Banxico, is the central bank of the country. His mission is to preserve the value of the currency of Mexico, Mexican peso (MXN) and find out monetary policy. To this end, its main goal is to maintain low and stable inflation in target levels – at 3%or approaching the target, half in the tolerance band from 2%to 4%.
The main tool Banxico to conduct monetary policy is to set interest rates. When inflation is above the target, the bank will try to tame it, raising the rates, which makes it more exorbitant for households and companies to borrow money, and thus cooling the economy. Higher interest rates are generally positive for the Mexican peso (MXN), because they lead to higher crops, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The key factor is the difference in foot compared to USD or the way Banxico will determine interest rates compared to the US Federal Reserve (FED).
Banxico meets eight times a year, and its monetary policy has a enormous influence of the decision of the US Federal Reserve (FED). That is why the Central Bank Decision Committee usually gathers a week after the Fed. In this way, Banxico reacts and sometimes predicts monetary policy means specified by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised the rates, Banxico did it for the first time, trying to reduce the chances of significant depreciation of Mexican peso (MXN) and prevent capital outflows that can destabilize the country.
