• US Dollar drops dramatically after October US CPI data.
• Banxico to announce monetary policy decision: a dovish last hike?
• USDMXN consolidating bearish bias, 19.00 on the radar.

The USDMXN dropped from above 19.50 to 19.35, hitting a fresh cycle low. It is hovering around 19.40, under pressure after US CPI numbers that weighed on the Dollar and ahead of Banxico’s decision.

Peso strengthens, while Dollar tumbles

The US Consumer Price Index (CPI) climbed 0.4% in October below the 0.6% of market consensus. The annual reading fell to 7.7%, the lowest level since January. The greenback collapsed after the reports and equity prices jumped.

In Wall Street, the Dow Jones is up by 2.45% and the Nasdaq by 5.68%. US yields are falling by almost 6%. The US Dollar Index is losing 1.77%, at the lowest since mid-September.

The inflation numbers from the US are welcome news not only for the Fed and the White House but also should be cheered in Mexico. With the Fed being less aggressive in raising rates, Banxico could face less pressure.

The CPI report came out just as the Bank of Mexico holds its monetary policy meeting. A decision will be announced in a few hours. A 75 basis points rate hike is expected, bringing the key rate to 10%. A dovish tone seems likely, not only after inflation figures from the US and Mexico, but also as the Dollar tumbles across the board.

A dovish Banxico is not necessarily bad for the Mexican Peso. US yields and risk appetite are also key factors for the performance of MXN which so far during 2022 is among the biggest gainers.

Technical levels