USD/MXN drops for the second-day in-a-row, remains in range

• Mexican peso rises again versus the US dollar but remains in recent range. 
• Trade headlines boost risk appetite, favors demand for emerging market currencies. 

The USD/MXN pair is trading at 19.10, slightly above the Asian session low. The pair retreated all the way down from 19.17 amid an improvement in market sentiment. 

Stocks up, MXN up, USD mixed 

The Greenback was stronger across the board earlier today on the back of higher US yields. Later, on a risk-on environment, it lost momentum, particularly versus commodity and emerging market currencies. Trade deal headlines increased the demand for riskier assets. US and China appear to be close to a deal that would lower tariffs. The so-called “phase one” has not yet been finalized.

Despite falling on Thursday, USD/MXN continues to trade in a range with a strong resistance between 19.20 (20-day moving average) and 19.25; while on the downside, the crucial area is 19.00 (long term bullish trend). 

Mexico: inflation remains at central bank’s target 

Data released today showed the Consumer Price Index in Mexico stood at 3.02% (annual) in October, close to Banxico’s 3% target. Prices rose by 0.54% in October and the core index 0.25%. 

The report kept expectations elevated about more rate cuts from the Bank of Mexico. Next Thursday is the Board meeting. A 25 bps interest rate cut is expected. Many economists consider the central bank could cut more aggressively taking into account that inflation remains on target, the exchange rate has remain steady and the economy is near stagnation.