USD/MXN tumbles below 19.00 to lowest in 2 months

• Mexican peso resumes rally versus USD after short-lived correction.
• USD/MXN heads for the lowest close since April.

The USD/MXN pair approached the 19.30 area earlier today but then reverses sharply. It eared daily gains and broke below 19.00, reaching at 18.92, the lowest intraday level since May 2.

The pair was holding near the lows, with a bearish tone intact. The consolidation under 19.00 could open the doors to more losses. On Monday, USD/MXN rebounded, on a normal correction and probably amid some profit taking after a 5% slide in a week.

Comments from president-elect Andrés Manuel López Obrador contributed to the rally of the Mexican peso. The slide of USD/MXN was also boosted by a weaker US dollar. If the pair extends the slide, support levels might be seen at 18.80 and 18.70. On the upside, 19.00 is the immediate resistance followed by 19.15 and the strong area around 19.30.

Mexican inflation confirms rebound

Yesterday, inflation data from Mexico showed that the Consumer Price Index (CPI) rebounded in April to 4.65% (annual), up from 4.51% of May. At the last meeting, the Bank of Mexico rose the key interest rate to 7.75%, the highest level in a decade, amid a deterioration of the inflation outlook.

The rise in the CPI ends five months of deceleration. It the rebounds extends and the Mexican peso depreciates, another rate hike from Banxico seems likely.