Skip to content
News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
USD/MXN Bounces as Bank of Mexico Elects to Cut Rates by 0.25%

USD/MXN Bounces as Bank of Mexico Elects to Cut Rates by 0.25%

Izaac Brook, Brendan Fagan,
  • Bank of Mexico cuts rates by 25 bps to 4.00% in a unanimous decision
  • Rate cut comes as Mexican economy struggles and remains frail
  • USD/MXN bounced in immediate trade following the release

The Bank of Mexico unanimously decided to cut interest rates by 25 bps to 4.00% after meeting on Thursday. The decision was in line with expectations, as a cut of 25 bps was foreseen as extremely likely given recent economic weakness in Mexico. The rate cut comes as the Mexican economy experienced its worst year since the Great Depression, with economic activity declining by 8% as a result of the pandemic.

Trading Forex News: The Strategy
Trading Forex News: The Strategy
Recommended by Izaac Brook
Trading Forex News: The Strategy
Get My Guide
Bank of Mexico Target Rate vs. USD/MXN

The Bank of Mexico embarked on an easing cycle beginning in August 2019, cutting rates so that they stood at 7.00% as of February 2020, down from a peak of 8.25% a year earlier. The onset of the pandemic and its economic impact drove the Bank of Mexico to take further aggressive action, with rate cuts of 50bps each in March, May, June, and August. A final cut of 25bps was made at the September meeting. During the November and December meetings, the Governing Board held the key rate steady at 4.25%. Today’s rate cut represents a change in course, as monetary policy now seeks to jumpstart a “slacking” economy.

Mexico CPI Print – January 2021

Upcoming Economic Releases

DailyFX Economic Calendar

The appointment of the more-dovish Galia Borja as a Deputy Governor in January has tilted the balance of the Governing Board towards a more dovish majority. Borja replaced Javier Guzman, who had voted to hold rates steady at the November and December meetings.

However, comments from Deputy Governor Jonathan Heath made in early February had suggested that any further rate cuts would be held off until April as bank officials wait to see how inflation moves.

Today’s decision comes shortly after a slightly higher than expected CPI print for January 2021, although the numbers remained within the central bank’s target of 3.0% +/- 1 percentage point.The Governing Board is looking to strike a balance between further easing and inflationary pressures. The Mexican economy is heavily dependent on the US economy, so progress towards the Biden administration’s stimulus bill could provide a further tailwind to growth.

Building Confidence in Trading
Building Confidence in Trading
Recommended by Izaac Brook
Building Confidence in Trading
Get My Guide

USD/MXN 15 Min. Chart


Chart from IG

After rising to historic highs above the 24.00 level during March 2020’s market volatility, USD/MXN declined up until mid-November. Since then, the pair has consolidated along the 20.00 level. The pair continues to be rangebound between 19.50 and 20.60. Recent dollar strength has seen USD/MXN retreat from its 3-month highs.

--- Written by Brendan Fagan & Izaac Brook, DailyFX Interns

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.