Forex News
Banco de Mexico (Banxico) reduced borrowing costs by 25 basis points on Thursday, as expected by market participants, from 6.75% to 6.50%, even though the central bank revealed that the “balance of risks for the trajectory of inflation within the forecast horizon remains biased to the upside.”
The central bank's decision was not unanimous, as Deputy Governors Galia Borja and Jonathan Heath voted to keep rates unchanged.
Banxico’s board noted that the decision concludes the easing cycle that began in March 2024, while adding that “economic slack is expected to be greater than previously anticipated.”
Key highlights:
BOARD MEMBERS HEATH AND BORJA VOTED TO HOLD RATE
BOARD MEMBERS RODRIGUEZ, MEJIA AND CUADRA VOTED TO CUT RATE
HEADLINE INFLATION IS PROJECTED TO CONVERGE TO TARGET IN Q2 OF 2027
LOOKING AHEAD, THE BOARD ESTIMATES IT WILL BE APPROPRIATE TO MAINTAIN THE RATE AT ITS CURRENT LEVEL
BALANCE OF RISKS FOR THE TRAJECTORY OF INFLATION WITHIN THE FORECAST HORIZON REMAINS BIASED TO THE UPSIDE
BOARD'S DECISION TOOK INTO ACCOUNT EXCHANGE RATE LEVELS, WEAKNESS OF ECONOMIC ACTIVITY, LEVEL OF MONETARY RESTRICTION IMPLEMENTED
ECONOMIC SLACK IS EXPECTED TO BE GREATER THAN PREVIOUSLY ANTICIPATED
THERE IS NO EVIDENCE OF SECOND-ROUND EFFECTS FROM THE FISCAL MEASURES ADOPTED AT THE BEGINNING OF THE YEAR
DECISION CONCLUDES THE CYCLE THAT BEGAN IN MARCH 2024
Banxico's inflation forecast
Mexican inflation does not justify Banxico’s decision
Earlier, the national statistics agency in Mexico (INEGI) reported that the Consumer Price Index (CPI) rose by 4.45% YoY in April. Core figures were also up by 4.26%, down a tenth of a percentage point from economists' estimates.
Banxico FAQs
The Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN), and to set the monetary policy. To this end, its main objective is to maintain low and stable inflation within target levels – at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%.
The main tool of the Banxico to guide monetary policy is by setting interest rates. When inflation is above target, the bank will attempt to tame it by raising rates, making it more expensive for households and businesses to borrow money and thus cooling the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The rate differential with the USD, or how the Banxico is expected to set interest rates compared with the US Federal Reserve (Fed), is a key factor.
Banxico meets eight times a year, and its monetary policy is greatly influenced by decisions of the US Federal Reserve (Fed). Therefore, the central bank’s decision-making committee usually gathers a week after the Fed. In doing so, Banxico reacts and sometimes anticipates monetary policy measures set by the Federal Reserve. For example, after the Covid-19 pandemic, before the Fed raised rates, Banxico did it first in an attempt to diminish the chances of a substantial depreciation of the Mexican Peso (MXN) and to prevent capital outflows that could destabilize the country.
UOB economists Enrico Tanuwidjaja and Sathit Talaengsatya argue that Thailand’s sharp April Consumer Price Index (CPI) jump is driven mainly by energy and selective food pass-through rather than broad demand-led reflation. They keep headline CPI forecasts at 1.4% for 2026 and 1.2% for 2027 and expect Bank of Thailand (BoT) to hold the policy rate at 1.00% through 2027.
Energy shock drives Thai inflation spike
"We keep our inflation projection unchanged: headline CPI at 1.4% in 2026 and 1.2% in 2027, and BOT on hold at 1.00% through 2026–27. The Apr print raises near-term upside risks, but weak demand, a negative output gap, administrative price smoothing, and limited wage-price spiral risk should cap second-round effects."
"Looking ahead, the official inflation outlook has shifted higher, but authorities still treat the shock as supply-led and monitorable rather than persistent domestic overheating. In its written base case, the Ministry of Commerce (MOC) maintains its 2026 headline inflation forecast range at 1.5%–2.5%, with a 2.0% midpoint, based on Dubai crude at USD75–85/bbl, USD/THB at 32.5–33.5, and GDP growth of 1.5%–2.5%. The MOC expects May inflation to remain positive, supported by domestic retail oil prices, prepared-food pass-through, higher pork and chicken prices, higher travel costs, and broader producer-cost pressure, partly offset by cost-of-living measures, lower electricity charges versus last year, and the slow recovery of fresh-fruit prices."
"In terms of monetary policy, the BOT’s MPC voted unanimously 6–0 on 29 Apr to maintain the policy rate at 1.00%. The BOT now forecasts GDP growth of 1.5% in 2026 and 2.0% in 2027, headline CPI of 2.9% in 2026 and 1.5% in 2027, and core CPI of 1.6% and 1.5%, respectively. Importantly, the central bank still expects price increases to be neither broad-based nor persistent under weak demand conditions, with medium-term inflation expectations anchored."
"We also maintain our call that BOT will keep the policy rate unchanged at 1.00% through 2026 and 2027, looking through first-round supply-side inflation unless second-round effects broaden into wages, services prices, inflation expectations, or disorderly FX pass-through."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
- Silver trims earlier gains as Middle East tensions continue to drive volatility across financial markets.
- Persistent Strait of Hormuz risks keep Oil prices elevated, supporting hawkish central bank expectations.
- XAG/USD remains technically constructive above key support levels despite easing from three-week highs.
Silver (XAG/USD) trims part of its earlier gains on Thursday as geopolitical headlines from the Middle East continue to stir volatility across financial markets. At the time of writing, XAG/USD is trading around $79.62 after easing from a three-week high near $82.00 touched earlier in the American session, though the metal remains up nearly 3% on the day.
Iran has imposed new rules for vessels passing through the Strait of Hormuz, according to CNN, in an attempt to tighten control over shipping movements through the waterway, which handles 20% of global Oil flows.
Persistent tensions surrounding the Strait of Hormuz keep Oil prices elevated, fueling inflation concerns and supporting hawkish central bank expectations, which in turn continue to cap upside attempts in Silver.
However, renewed hopes that the US and Iran could reach a deal to end the war in the Middle East support the metal in the near term, while technical indicators also remain constructive.
Technical Analysis:
In the daily chart, XAG/USD holds above the 20-day Simple Moving Average (SMA) Bollinger middle band at $76.32, keeping the near‑term bias constructive while it grinds toward the upper Bollinger band, now capping the upside around $81.43. The Relative Strength Index (14) at 57 sits in positive territory without being overbought, suggesting buyers retain control, while the subdued Average Directional Index (14) near 12.76 hints that the prevailing uptrend lacks strong directional conviction for now.
On the topside, immediate resistance is located at the upper Bollinger band at $81.43; a daily close above this barrier would open the door for a more impulsive extension of the bull leg. On the downside, initial support is provided by the 20-day SMA Bollinger middle band at $76.32, with a deeper pullback likely finding additional protection near the lower Bollinger band around $71.21 as long as the broader bullish structure remains intact.
(The technical analysis of this story was written with the help of an AI tool.)
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.09% | 0.25% | 0.05% | 0.10% | 0.05% | 0.02% | |
| EUR | 0.00% | 0.09% | 0.28% | 0.06% | 0.10% | 0.05% | 0.02% | |
| GBP | -0.09% | -0.09% | 0.17% | -0.04% | 0.00% | -0.04% | -0.07% | |
| JPY | -0.25% | -0.28% | -0.17% | -0.22% | -0.16% | -0.26% | -0.23% | |
| CAD | -0.05% | -0.06% | 0.04% | 0.22% | 0.06% | 0.00% | -0.03% | |
| AUD | -0.10% | -0.10% | -0.01% | 0.16% | -0.06% | -0.05% | -0.09% | |
| NZD | -0.05% | -0.05% | 0.04% | 0.26% | 0.00% | 0.05% | -0.03% | |
| CHF | -0.02% | -0.02% | 0.07% | 0.23% | 0.03% | 0.09% | 0.03% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Standard Chartered economists Jonathan Koh and Edward Lee argue that the Bangko Sentral ng Pilipinas (BSP) will stay hawkish despite softer growth in the Philippines. They stress that higher inflation projections and elevated April Consumer Price Index (CPI) keep inflation at the forefront of policy. They maintain their call for a 50 bps off-cycle rate hike before the June meeting, followed by gradual easing from Q2 2027.
Inflation risks drive BSP policy path
"We think inflation concerns will dominate near-term monetary policy deliberations."
"BSP’s latest projections (in the post-April CPI report) point to a significantly higher inflation path; it had previously forecast 2026 at 6.3%, and April inflation of 7.2% y/y was above its 5.6-6.4% range."
"We maintain our call for an off-cycle 50bp rate hike before the June meeting, as BSP will likely seek to contain inflation expectations."
"However, we see rate hikes being reversed from Q2-2027 once inflation eases amid the soft growth backdrop, to return the policy rate to 4.5% by end-2027."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Priced for peace
The morning belonged to the deal: Asia had ripped overnight, with the Nikkei 225 clearing 62,000 for the first time on a session that gained north of 5%, and US futures came in primed for another leg of the Iran ceasefire trade. The US Dollar Index (DXY) sagged toward 97.60, equities printed fresh intraday records, and West Texas Intermediate (WTI) Crude Oil cracked below $90, briefly tagging the $87 area. The setup was about as cleanly risk-on as it gets: traders sold safe havens and bid up anything geared to global growth, all in anticipation that Tehran would deliver its response to the latest US proposal via Pakistani mediators today. The one-page memorandum on the table would declare an end to the war and trigger a 30-day window for the harder questions, namely nuclear enrichment, frozen Iranian assets, and security in the Strait of Hormuz. President Donald Trump's "very good talks" comments overnight gave the trade its blessing. By midday, the safe-haven US Dollar (USD) bid looked, briefly, like a relic of a different war.
The fine print fights back
Then substance caught up with headlines. The same Trump talking up "very good talks" had warned earlier in the week of strikes "at a much higher level and intensity" if Iran fails to deliver, and Tehran's quiet condition, namely the lifting of the US naval blockade as the price of any further progress, started filtering back through the screens. The Islamic Revolutionary Guard Corps (IRGC) is still issuing public notices thanking captains for "complying with Iran's Strait of Hormuz regulations." The broader Project Freedom escort operation remains paused, but rumors are gathering speed that the Trump administration is angling to ramp it back up as quickly as they triumphantly announced its suspension. US gasoline at the pump is tracking near $4.54 a gallon, the highest since July 2022.
Add hawkish Federal Reserve (Fed) speeches from Collins and Hammack into the late-session bid, and the unwind was visible across the board: DXY pushed back above 98, WTI Crude Oil reversed back above $98, and the S&P 500 faded from its intraday record into the red. Risk-off has quietly walked back into the room. The hope trade had a window; reality closed it. Whether Friday's Nonfarm Payrolls (NFP) print, with consensus at a soft 62K versus 178K prior, extends the Dollar's reversal or hands the bears another reason to fade it is the question now sitting on every desk.
DXY 15-minute chart
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off'' refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
- EUR/USD eases from intraday highs as renewed Strait of Hormuz concerns support the US Dollar and Oil prices.
- Traders monitor evolving US-Iran developments as diplomatic efforts to end the war continue.
- Fed and ECB officials maintain a cautious stance amid elevated energy-driven inflation risks.
EUR/USD eases from intraday highs on Thursday as evolving geopolitical developments surrounding tensions in the Middle East help the US Dollar (USD) and Oil prices recover some of their recent losses. At the time of writing, the pair is trading around 1.1748 after touching an intraday high near 1.1778.
Meanwhile, the US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, recovered toward 98.00 after sliding to near pre-war levels earlier in the week.
Market sentiment turned cautious after reports that the US is looking to restart “Project Freedom” to help unblock the Strait of Hormuz, according to US officials cited by The Wall Street Journal. However, a US official later told Al Jazeera that reports about preparations to resume the operation were incorrect.
In a separate development, CNN reported that Tehran has laid out a new set of rules for vessels seeking to transit the Strait of Hormuz, according to a document seen by the news outlet.
The document, titled “Vessel Information Declaration,” was issued by Iran’s newly created Persian Gulf Strait Authority (PGSA) and must be completed by all transiting vessels to ensure safe passage through the waterway. It remains unclear whether transit fees will be imposed, though earlier reports suggested fees of about $2 million for passage.
The latest developments come after reports that the US and Iran are moving closer to an agreement aimed at ending the war, with Tehran reviewing the latest US-backed proposal and expected to respond through Pakistani mediators in the coming days.
Although Oil prices have eased from recent highs, persistent uncertainty surrounding the Strait of Hormuz since the war began has kept prices elevated, fueling inflation concerns and increasing pressure on central banks to raise interest rates.
Fed officials’ cautious tone has further reinforced this view. Boston Fed President Susan Collins said on Thursday that interest rates may need to remain on hold “for a longer period” while warning that “the odds of a worse inflation scenario have increased.”
Traders now await Friday’s Nonfarm Payrolls (NFP) report for fresh clues on the Federal Reserve’s policy path ahead.
On the Euro side, European Central Bank (ECB) policymaker Isabel Schnabel warned that policy “will need to tighten if the energy shock spreads,” adding that the ECB would take the “necessary steps to restore inflation to 2%.”
DBS Group Research’s Radhika Rao highlights Bank Indonesia’s latest steps to manage FX volatility and support the Indonesian Rupiah. The central bank has tightened documentation thresholds for Dollar purchases, continued bond buying and enabled selected dealers to access offshore NDFs. The risk of further FX restrictions is seen easing if a US–Iran ceasefire stabilizes regional currencies.
Bank Indonesia tightens FX access
"As part of a seven-step agenda, Bank Indonesia tightened the limit on foreign currency purchases, without supporting documents, to $25k from $50k monthly cap, after similar action last month."
"BI’s move to further tighten the FX threshold aims to streamline demand for US dollars and ensure purchases are tied to genuine underlying needs rather than speculative activity."
"Other steps include plans to continue with bond purchases (IDR 123trn purchases ytd) in coordination with the MOF."
"Besides strong intervention presence, attractive SRBI returns have also drawn offshore investors in recent weeks."
"The risk of additional FX curbs/ measures will diminish if a US-Iran ceasefire provides a breather to the regional currencies."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
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