The Mexican peso steadied against the US dollar after Federal Reserve meeting minutes indicated officials still expect another rate rise by year-end, leaving USD/MXN around 17.98 and little changed on the session. The currency’s recent decline has eased after a drop of more than 7% since 21 September, when the pair hit 18.43 before retreating over 2.3% to just below the 18.00 threshold. Upward pressure on US Treasury yields, reinforced by higher energy prices, had fuelled expectations of tighter US policy and weighed on the carry trade.
Central Bank Policy Actions and Market Responses
In September, the Fed lifted rates by 25 basis points, narrowing the interest-rate gap, while the Bank of Mexico kept policy unchanged; economists surveyed by the central bank see Mexico’s rate staying at 6.50% through to end-2027. The Fed minutes also showed a split: some viewed September’s move as precautionary, while others framed it as the start of a tightening cycle, with inflation above the 2% goal for five years and references to a higher neutral rate. Derivatives pricing points to an 81% probability of no hike this month and 19% for an increase. Technically, spot was 17.9871 with the SMA composite near 17.2682, RSI (14) at 67.0, resistance from 21.0808, and supports at 17.27 and 16.8866.
