Usdmxn Maintains A Neutral Stance

Usdmxn Maintains A Neutral Stance by Andrew Blumer last updated on February 03, 2024

USD/MXN Maintains A Neutral Stance Despite Rate Cut Rumors

It appears that the Mexican Peso (MXN) is holding its ground against the greenback (USD). This is of significant importance given that both the central banks have finished their meetings.

One thing has become clear after the central bank meetings, and it is the divergence between the Bank of Mexico and the Federal Reserve. Given the fundamental backdrop, some analysts believe that the USD/MXN will likely stay under the 18.00 handle until the end of 2023.

No Change In Mexico's Interest Rate

For now, the USD/MXN can be seen trading near 17.18 with a neutral outlook. On a daily basis, the pair has lost a meager 0.02%, which is pretty much nothing given the normal price action movements seen on other days.

On the Mexican side, the central bank has kept the rates steady at 11.25%, which is similar to what happened in the USA. After the announcement by Banxico, the pair moved lower and thus increased the distance from the current trading price to the 100 SMA (d1).

However, the positive data from the US side rescued the USD against the MXN and prevented the pair from touching the 17.03 - 17.00 support zone.

Another noteworthy development is a recent survey from Banxico, which suggests that the growth forecast for the year 2024 has changed to 2.29% from 2.10%. In addition, the forecast also shows a 4% inflation in Mexico during 2024.

As for the monetary policy, the Central Bank of Mexico will likely introduce a 200 basis points rate cut, which will move the interest rate lower to 9.25%. This will also send the Mexican Peso (MXN) lower towards the 18.53 in 2024.

For now, the US Dollar/Mexican Peso is showing a neutral bias despite dropping under the 100 SMA. Some experts believe that the 100 SMA was a major support zone for the USD buyers, which is now lost to the sellers.

Looking forward, there's a chance of both upside and downside based on which side conquers the 100 SMA (D1).