USD/MXN consolidates losses below 20.00 after Banxico raises rates

• Mexican peso holds to gains, among top performers of the day. 
• Banxico raises rates as expected to 8.25%, highest level since August 2008.
• Lower crude oil and risk aversion limits upside in MXN.

The Mexican peso remained steady after the decision of the Bank of Mexico to raise the key interest rate. It consolidated significant daily gains, extending the rally against the US Dollar that started two weeks ago. 

The USD/MXN broke below 20.00 earlier today and tumbled to 19.80, hitting the lowest level in a month. During the US session, the Mexican peso lost momentum amid risk aversion across financial markets and the pair rebounded. The recovery from the lows found resistance at 19.95. 

Over the last hours, USD/MXN has been steady hovering around 19.90. The decision of the central bank of Mexico had no influence on the Mexican peso. Banxico rose the key interest rate by 25 basis points to 8.25% as expected, on a unanimous decision. It warned about uncertainty caused by the new government policies and the risks of higher inflation. 

Oil and risk aversion 

From a technical perspective, the Mexican peso received a considerable boost today with the breakout of USD/MXX under 20.00. The technical outlook points to further losses. The move lower on Thursday was limited by a slide in crude oil prices to fresh lows. The WTI lost 4%, and equity prices in Wall Street were falling sharply. The Dow Jones was down 1.70% and the Nasdaq 1.20%. 

The risk aversion environment limited the rally of emerging market currencies. However, the weakens of the US prevailed. The greenback was the worst performer, making a sharp reversal after yesterday’s rally following the FOMC meeting.