The minutes from Banco de Mexico’s (Banxico) recent monetary policy meeting indicate a potential continuation of easing measures. Board members cited increasing economic slack and heightened downside risks to inflation as justification for further policy adjustments. A majority of the board observed orderly trading conditions and improved liquidity in the Mexican Peso (MXN) market, despite ongoing external volatility.
The board acknowledged the ongoing deceleration of the Mexican economy and the progression of disinflation. Future monetary policy calibration may involve adjustments of similar magnitude to recent actions. Concerns were expressed regarding the balance of risks to economic activity, which is perceived to be skewed to the downside. Downside risks to inflation were also deemed to have become more prominent. The anticipated weakness in economic activity and increased slack are expected to contribute to the continued disinflation process.
From a technical perspective, the USD/MXN exchange rate exhibits an upward bias. However, a breach of the 20.30 level could lead to further depreciation, potentially testing the 20.00 support level. A sustained move above 20.50 would suggest a resumption of bullish momentum, targeting 21.00.
