USD/MXN drops to 3-week lows

The Mexican peso is among the top performers on Monday. USD/MXN is falling for the fifth day in a row as it continues to decline after finding resistance again at 19.25 last week. 

Most emerging market currencies rose against the US dollar. The peso received an extra impulse from the rally in crude oil prices. The WTI eased during the last hours but it was still up more than 2%. 

USD/MXN broke below the key support around 18.70/75 and dropped to 18.62, hitting the lowest level since April. Near the end of the session, it was trading at 18.67, holding a bearish tone. If the decline continues, the pair could test the 18.50 zone and below, 2017 lows at 18.45. 

Banxico decision eyed 

On Thursday the Bank of Mexico will announce its decision on monetary policy. After rising 25 basis point at the previous meeting to 6.5%, now consensus point to no change, with some analysts signaling that it is possible to see another 25bp hike. 

“April CPI rose 5.8% y/y, the highest rate since May 2009 and further above the 2-4% target range. While further tightening would seem warranted, we think Banxico will remain on hold now. If the Fed hikes in June and price pressures are still rising, then a hike at its June 22 meeting seems likely”, said analysts from Brown Brothers Harriman. 

IMF’s Werner: High levels of uncertainty for the Mexican economy for next 12 to 18 months