USD/MXN falls below 20.50 as Peso recovers

The Mexican peso is rising against the US dollar on Monday, erasing Friday’s losses. USD/MXN opened the week above 20.60 and then dropped to 20.40. It was trading 20.43, down 0.87% for the day so far. 

Consolidation continues

After surging more than 10% following Donald Trump victory, USD/MXN stabilized. The pair continues to move around 20.50, in a range between 20.75 and 20.20. Price has remained in the mentioned range since last week. 

Today Greenback is retreating across the board, although still remains near November highs helping the decline in USD/MXN. Also, the recovery in crude oil prices (WTI up 3.50% ) is favoring the Mexican peso. 

Banxico watching MXN and waiting for data and the Fed

Last week, the central bank of Mexico rose rates by 50 bp to 5.25% after the sharp depreciation of the peso following the US elections. The next meeting will be December15, one day after the Federal Reserve decision. Banxico officials will also keep an eye on data during the current week, particularly on Thursday with the mid-month inflation report. 

A combination of higher inflation, another decline of the Mexican peso and a rate hike from the Federal Reserve could lead to another hike from Banxico.