- The Mexican peso among the worst performers on Thursday.
- The US dollar rebounds strongly after the Fed strategy update as US yields soar.
USD / MXN hit a low earlier Thursday at 21.81, the lowest level since May, but then rebounded dramatically, leaving the Mexican peso exposed to more short-term losses.
At the time of writing, the USD / MXN is trading at 22.22, the highest level in one week. The dramatic reversal could indicate more gains over the next few days for the pair if current levels hold. A close above 22.25 would add support to the shift from the short-term bias to bullish. Only a pullback below 22.00 would continue to favor the Mexican peso.
The Bank of Mexico released the minutes of its last meeting when it cut the rate by 50 basis points. Council members believed that the recovery of the economy will depend on the coronavirus and the development of a vaccine. At the time, a member voted against the decision. It was Irene Espinosa-Cantellano. According to her, there is less room for an easing of monetary policy as inflation has persisted above target and capital outflows from foreign investors.
A stable Mexican peso is the key to further interest rate cuts. If the USD / MXN rises sharply, the release cycle could end sooner than expected.