Fed keeps rates steady, Banxico up next

The US Federal Reserve has kept interest rates steady at 5.25%-5.50% while continuing its balance sheet reduction as planned since May 2023.

In contrast, the Bank of Mexico (Banxico) might announce a rate cut tomorrow.

It's anticipated that Banxico could decrease its interest rate from 11.25% to 11%, potentially applying pressure on the Mexican peso. This could drive the USD/MXN rate closer to the 17.00 mark, diverging further from its 10-year low. Some Fib levels from its recent swing higher could also be some interesting, more assessable, targets

However, the possibility of a rate cut from Banxico is not guaranteed, given potential divisions within its Governing Council. Recent speeches by officials indicate a 3-2 split, with some members leaning towards a more accommodative approach, while others like Jonathan Heath and Irene Espinosa Cantellano favor a hawkish stance.