USD/MXN hits YTD low below 17.10 as Fed holds rates, Powell's dovish tilt wobbles USD – by christianborjon USDMXN Currencies EmergingMarkets Fed InterestRate
statement, Fed officials highlighted the labor market remains robust, the unemployment rate low, and inflation elevated. Nevertheless, tightness on credit conditions and the cumulative tightening weighed on Powell and Co. to keep rates unchanged.
Aside from the statement, the Summary of Economic Projections surprised the markets, with 12 policymakers expecting at least 50 bps of additional tightening to the Federal Funds Rate , moving the needle up to 5.6%, according to the median. Delving deeper into the SEP, growth is expected to be higher than March’s 0.4%, at 1%, while the Unemployment Rate was downward revised to 4.1%. The Fed’s preferred gauge for inflation, the core PCE is predicted to hit 3.9% by year’s end, up from 3.6% in March.
Back to Jerome Powell’s press conference, he said the Fed is watching credit conditions and keeping the door open for July’s monetary policy meeting. He said the Fed would decide its policy meeting by meeting, suggesting everything is on the table for July. settled for a close above 103.000, though it did not weigh on the USD/MXN pair, which extended its losses below 17.10. US Treasury bond yields finished unchanged, with the 10-year benchmark note rate at 3.
Nevertheless, a bearish continuation would put into play the 17.0000 figure. Once broken, the next support would be 16.5000 before tumbling toward an October 2015 low of 16.3267. Contrarily, if USD/MXN buyers want to shift the trend to neutral, they must conquer May 16 low-turned resistance at 17.4038.
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