<\/p>\n
The Mexican Peso (MXN) traces a flat line on most charts on Thursday, as traders digest the previous day\u2019s gains prompted by comments from Banxico Deputy Governor Jonathan Heath.\u00a0<\/p>\n
At its last meeting in March, Banxico decided to cut interest rates from 11.25% to 11.00%. However, Heath said that the bank would likely only make \u201cfine adjustments\u201d to interest rates going forward because stubbornly high inflation required them to remain elevated for some time yet.<\/p>\n
It was necessary to ensure that \u201cthe restrictive monetary stance remains at these levels for as long as necessary until we see progress on inflation,\u201d said Heath in an interview with Banorte\u2019s Podcast on Wednesday.\u00a0<\/p>\n
Since the maintenance of higher interest rates is positive for a currency, because it attracts greater inflows of foreign capital, the Mexican Peso appreciated on the news<\/a>.\u00a0<\/p>\n The Mexican Peso has weakened overall in April despite Wednesday\u2019s Heath-inspired recovery. This is mostly due to the Banxico cutting interest rates in March whilst the majority of major central banks continue to delay because of stubbornly high inflation.\u00a0<\/p>\n The Peso may also have been hit by recent downgrades to growth forecasts for the Mexican economy from both the Banxico and the IMF.\u00a0<\/p>\n \u201cThe forecast<\/a> for Mexico is revised downward on account of weaker-than-expected outcomes for end-2023 and early 2024, with a contraction in manufacturing,\u201d said the IMF in its latest World Economic Outlook report.<\/p>\n The fall off in economic growth is being put down to lower government spending in 2025, in order to bring down the country\u2019s budget deficit.\u00a0<\/p>\n However, it\u2019s difficult to see how a programme of radical budget cuts would work politically.\u00a0<\/p>\n Mexico will hold a presidential election on June 2, when it will also vote in the 628 deputies of the national assembly. It\u2019s likely to be a two-horse race between the leading center-left candidates\u2019 Claudia Scheinbaum and Xochitl G\u00e1lvez, according to Columbia Threadneedle Investments.\u00a0<\/p>\n \u201cWe believe that regardless of who wins the election, Mexico is bound for a similar fate as other countries in the region, where governability has weakened and policy proposals have stagnated,\u201d says Columbia Threadneedle on the outcome.\u00a0<\/p>\n Given both candidates are of the left and likely to lead a weak government, expectations for budget tightening seem a little exaggerated, given the lack of maneuver foreseen to make unpopular decisions.\u00a0<\/p>\n USD\/MXN \u2013 the value of one US Dollar in Mexican Pesos \u2013 is consolidating in what could be a kind of bullish Pennant price pattern on the 4-hour chart.\u00a0<\/p>\n The evolution of the Pennant suggests the likelihood of further upside if it breaks higher.\u00a0<\/p>\n Given peaks and troughs are overall rising on the chart<\/a>, the trend is likely bullish in the short-term, favoring long positions.\u00a0<\/p>\nMexican Peso trending lower in April<\/h2>\n
Technical Analysis: USD\/MXN forms bullish Pennant<\/h2>\n
USD\/MXN 4-hour Chart\u00a0<\/h3>\n