Banxico's surprise rate cut to 6.25% has triggered a sell-off in the Mexican Peso, with markets now betting on further easing by year-end and USD/MXN potentially testing the 19.00 threshold.
Banxico unexpectedly cut its reference rate by 25 basis points to 6.25% on Thursday, against expectations of a hold at 6.50%, weakening the Peso. Money markets now price an 88% chance of another cut by December, which increases the odds USD/MXN tests 19.00. The daily chart keeps a constructive bullish bias above the SMA cluster at 17.89, though a divided 3-2 vote argues for caution.
Banxico unexpectedly cut its main interest rate by 25 basis points to 6.25% when markets expected a hold at 6.50%, and traders now see an 88% chance of another cut by December, pushing USD/MXN higher.
The article notes the pair could test the 19.00 figure in the near term given expectations of another rate cut, while support sits around 17.89 on the downside.
The Mexican Peso weakened after the Bank of Mexico unexpectedly cut its benchmark interest rate by 25 basis points to 6.25%. The decision, which defied market expectations for a hold, was split 3-2 among policymakers. Traders are now pricing in an 88% probability of further easing by December, keeping the USD/MXN pair under upward pressure as it eyes the 19.00 level.
The Peso depreciated because Banxico unexpectedly cut interest rates by 25 basis points to 6.25% when markets were positioned for a hold, signaling a more dovish stance than anticipated.
Given the increased probability of further rate cuts by December, analysts suggest the USD/MXN pair could test the 19.00 level in the near term, with support holding at 17.89.