USD/MXN rebounds after 2-day correction, approaches 19.80

• Mexican peso drops against the US Dollar but outperforms among EM currencies. 
• Mid-month inflation data show prices easing more than expected in August in Mexico.

The USD/MXN moved all day with a bullish bias. During the American session the pair peaked at 19.77 and near the end of the session was trading at 19.75, up seven cents for the day. The US Dollar resume the upside after making a two-day correction from the YTD high at 19.89 to 19.64. 

The main trend still points to the upside and global growth concerns and the lack of positive news support that bias. From a technical perspective, if USD/MXN rises back on top of 19.80 it will likely gain strength, signaling a test of weekly highs and probably 20.00. On the flip side, a daily close under 19.65 would ease the bullish pressure. 

Mexico: Lower inflation, more rate cuts? 

Data released today showed that Mexican inflation eased during the first half of August. The INEGI reported the CPI dropped by 0.08% during the first half of August, against expectations of a 0.17% increase. From a year ago, it rose 3.29%. 

The slowdown in inflation open the doors to more rate cut from the Bank of Mexico. Last week it cut the key rate for the first time since 2014, from the decade high of 8.25% to 8.00%. The decision was not unanimous as one member voted to keep rates steady. It the Mexican peso remains steady, another rate cut or two before year-end appears to be granted according to most analysts. 

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