USD/MXN heads for highest close since December

• USD/MXN gains for the second day in a row, eyes 2018 highs.
• Latin American currencies were the worst performers on Monday.

The Mexican peso opened the week under pressure against the US Dollar and approached 2018 lows. USD/MXN is about to post the highest daily close since December.

The pair on Friday reached 19.14 before bouncing to the upside, ending the week at 19.43. On Monday it started to rise on European hours and extended gains during the American session. It broke above 19.50 and peaked at 19.61, below last week intraday high of 19.69. The corrective tone disappeared and the bullish momentum reemerged on the USD/MXN chart.

Nafta, Banxico and elections

The greenback rose on Monday against Emerging market currencies and particularly versus Latin American. The worst performer was the Argentinean peso that lost 8% while the Mexican currency declined 1%. After a brief pause, EM currencies appear to be back under pressure.

A factor the could influence on USD/MXN over the next day are NAFTA talks. The current week is decisive and headlines are expected. Also in Mexico, the presidential campaign is a key driver.

Regarding momentary policy, the Governing Council of the Bank of Mexico meets on Thursday. It is expected to keep rates unchanged at 7.5%. “CPI rose 4.6% y/y in April, the lowest since December 2016 but still above the 2-4% target range.  If the peso remains under pressure this week, then we see a growing chance of a hawkish surprise”, said analysts at BBH.