USD/MXN remains above 19.60, at 20-day highs after Banxico cuts interest rate

• Mexican Peso rises modestly after rate cut, holds in negative territory about to post the lowest close in three weeks. 
• Banxico cuts key rate by 25bsp; two members wanted a bigger cut. 

The USD/MXN pair rose at the beginning of the American session and peaked at 19.66, the highest level since September 6. Following the decision of the Bank of Mexico pulled back to 19.57 but quickly bounced back to the 19.65. 

USD/MXN signals more gains ahead 

The pair is about to post a daily close on top of the 19.60 barrier and also above the 20-day moving average for the first time since the beginning of the month. Now it could face resistance at 19.70 ahead of the stronger area of 19.80.

A decline below 19.60 would ease the bullish pressure while under 19.50 it will likely trade back in the 19.30/50 range. On the downside, 19.30 is the critical level to break to clear the way to more losses. 

Banxico cuts as expected 

As mostly expected, the Bank of Mexico (Banxico) on Thursday cut its benchmark interest by 25 basis points to 7.75% from 8%. Some analyst noted a more significant cut was possible and even two board members (out of five)  wanted a 50bps cut. 

According to the central bank, marked uncertainty persists about both upward and downward risks that could influence inflation. "It is particularly important to maintain a prudent, firm monetary policy and promote measures that encourage investment certainty”, Banxico concluded. The statement had little changes from the previous one, leaving the doors open to more cuts, but not moving into a more dovish stance.