The Mexican Peso has come under pressure following the Bank of Mexico's (Banxico) decision to keep its policy rate unchanged at 6.50%, according to Societe Generale strategists [1]. The central bank's statement was described as neutral, indicating a likely extended pause in rate changes, while market participants are pricing in a modest 25 basis point hike before the end of the year [1]. Inflation projections from Banxico remained largely unchanged, with mid-June inflation slowing more than expected to 3.55% [1]. Economic activity, as measured by a monthly GDP proxy, rose by 1.2% month-on-month in April, marking the fastest growth since March 2021 [1].
On the currency front, USD/MXN has held key lows near 17.10 during the recent pullback, signaling waning downward momentum and an attempt to break out from a small base formation [1]. The pair crossed 17.50 for the first time in three months, with initial resistance at the 200-day moving average around 17.80 and near-term support at the recent low of 17.30 [1]. Societe Generale notes that a move above the 200-DMA would be crucial for confirming a larger rebound in USD/MXN [1].
Additionally, Mexico conducted a $6.3 billion two-part USD debt sale, and the impending USMCA review scheduled for early July is highlighted as a potential market event [1].
CONCLUSION
The Mexican Peso is experiencing renewed pressure as Banxico signals a prolonged pause in rate changes, while markets anticipate a modest hike by year-end. Key technical levels in USD/MXN suggest potential for further volatility, with upcoming events such as the USMCA review and recent debt issuance adding to market uncertainty.