The USD/MXN exchange rate has hit a new low for the year at 17.0900 after the U.S. Federal Reserve decided to maintain interest rates in the range of 5.00%-5.25% for ten consecutive rate hikes. Despite the initial weakening of the Mexican peso (MXN), Powell’s slightly “Dovish” stance has caused the exchange rate to drop even further. Currently, USD/MXN is trading at 17.0990. This is a seven-year low.
Wednesday marked Fed Day, and Fed Chairman Jerome Powell and his team chose not to make any changes, citing a “moderate” approach to their tightening cycle. Their official statement on monetary policy highlighted the stability of the labor market, low unemployment rate, and inflation. However, due to the cumulative impact of credit tightening, it was challenging for Powell and his team to maintain the current interest rates.
Aside from the aforementioned – statement, the Summary of Economic Projections (SEP) has piqued the market interest. To be precise,12 policymakers have expressed their anticipation for a 50 basis point hike in the federal funds rate (FFR), which would lead to a median rate of 5.6%.
Looking into the SEP report, It appears that: there is a projected growth increase of 1% compared to 0.4% in March. Additionally, the unemployment rate has been revised to a lower 4.1%. It is noted that the core PCE, which is the Fed’s preferred measure of inflation, is expected to rise to 3.9% by the end of the year, showing an increase from its 3.6% measurement in March.
During Jerome Powell’s press conference, he stated that the Federal Reserve is closely monitoring credit conditions and has the option to hold a monetary policy meeting in July. He also mentioned that the decision regarding the policy meeting; will be made during the forum itself and emphasized that all options are being considered for July.
Yesterday, Powell frequently mentioned two words: Inflation and Down. These words provide insight into the current state of the American economy, indicating that inflation is decreasing.
The most crucial objective of the Federal Reserve is to maintain inflation at 2%.
Long USD/MXN (Buy)
Enter the number: 17.25793
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