Mexican Peso surges past key level amid firm US Dollar

  • Mexican Peso rallies as USD/MXN drops below 18.00 and hits lowest level since June 25.
  • June’s CPI report, Consumer Confidence, and Industrial Production to shape Mexico’s economic outlook.
  • Banxico minutes likely to signal patience on rate cuts amid steady inflation expectations.

The Mexican Peso rallied sharply against the US Dollar as the USD/MXN fell below the 18.00 psychological figure on Monday, a level last seen on June 25. This signaled that Peso’s buyers remain committed to the so-called “carry trade,” which underpins the Mexican currency. Therefore, the exotic pair exchanged hands at 17.99, down 0.45%.

Mexico’s economic docket will interest traders. The focus is June’s Consumer Price Index (CPI) report, which will be released on July 9. Further data, like Consumer Confidence and Industrial Production, will be released, which will dictate the economic trend and set it to slow down, according to analysts.

On Thursday, the Bank of Mexico (Banxico) will reveal the latest meeting monetary policy minutes, which are expected to show that the central bank will remain patient regarding cutting borrowing costs.

Across the border, the New York Federal Reserve revealed that consumer inflation expectations were lowered from 3.2% to 3% for one year. Besides that, market players will be focused on Federal Reserve (Fed) Chair Jerome Powell’s speech at the US Congress on Tuesday and Wednesday and the release of June’s inflation figures.

Last week’s US jobs data sparked speculation that the Fed might ease policy in September, according to the CME FedWatch Tool data. Odds for a September cut stand at 73%, up from 71% last Friday.

Daily digest market movers: Mexican Peso rises further despite firm US Dollar

  • Banxico’s survey showed that economists estimate the Gross Domestic Product (GDP) will end the year at 2%, down from 2.1%. They expect Banxico to cut rates from 11.00% to 10.25%, up from 10.00% projected in May.
  • Some analysts in Mexico estimate the economy might slow down but dodge a recession, according to the National Statistics Agency (INEGI) Coincident Indicator. Despite that, they said reforms pushed by President Andres Manuel Lopez Obrador (AMLO), particularly the judiciary reform, could affect the country’s creditworthiness.
  • Mexico’s CPI is expected to rise from 4.69% YoY to 4.84% in June, while core CPI is estimated to dip from 4.21% to 4.15% annually.
  • US CPI is foreseen to drop from 3.3% to 3.1% in the 12 months to June, while underlying inflation is projected to stay firm at 3.4% YoY.
  • US Dollar Index (DXY), which tracks the value of a basket of six currencies against the American Dollar, stays firm at 104.94, up 0.06%.

Technical analysis: Mexican Peso stays near weekly highs as USD/MXN hovers around 18.00

The USD/MXN reached a nine-day low of 17.97, though some bids below the 18.00 figure lifted the pair above the latter. The Greenback remains soft against the Peso. The momentum has shifted in the sellers’ favor, with the Relative Strength Index (RSI) about to drop below the 50-neutral line.

If USD/MXN achieves a daily close below 18.00, the next support would be the June 24 swing low of 17.87. Further losses lie underneath at the 50-day Simple Moving Average (SMA) at 17.56, followed by the 200-day SMA at 17.26. The next floor level would be the 100-day SMA at 17.17.

For a bullish resumption, the USD/MXN must surpass 18.10, followed by a rally above the June 28 high of 18.59, so buyers can challenge the YTD high at 18.99. Conversely, sellers will need a drop below 18.00, which could extend the pair’s decline toward the December 5 high, which turned support at 17.56, followed by the 50-day Simple Moving Average (SMA) at 17.37.

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.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Read More

Spread the love
Nicholas ‘Nick’ Statman entered the property industry in 2001 and set up a property buying company that quickly established itself as one of the biggest in the sector. During this time the Company successfully transacted on thousands of residential properties across the UK. Nicholas Statman was an early pioneer of the ‘quick sale’ niche market which has since grown considerably with a multitude of companies now operating in the sector. Nicholas Statman has strategically built a sizeable residential and commercial property portfolio with a view to holding for optimum capital growth and a long term passive income. Nicholas Statman has been involved in almost every aspect of the property sector over a 20 year period – this includes buying and selling, development, letting and management and is now involved in the fast growing online/ hybrid Estate Agent industry.

Latest articles

Tinubu launches agric empowerment programme in Yobe

President Bola Ahmed Tinubu has launched the Yobe State Agricultural Empowerment Programme in Damaturu, the state capital. A statement by Senior Special Assistant to the President on Media and Information, The post Tinubu launches agric empowerment programme in Yobe appeared first on The Nation Newspaper...

Five EPL clubs starting 2024/2025 season with new managers

As the countdown to the 2024/2025 English Premier League (EPL) season begins, several clubs have made significant changes at the managerial helm. Others are preparing for massive changes on the The post Five EPL clubs starting 2024/2025 season with new managers appeared first on The Nation Newspaper...

EPL: Ragnick was right about Man Utd problems –...

Manchester United manager Erik ten Hag says former interim boss Ralf Rangnick was “absolutely right” about the club needing “open-heart” surgery. Ten Hag, 54, was appointed manager in 2022 after The post EPL: Ragnick was right about Man Utd problems – Ten Hag appeared first on The Nation Newspaper...

DSS kills kidnapper of mother of Hausa singer Rarara

Operatives of the Department of State Service (DSS) have reportedly killed one of the kidnappers of the mother of famous Hausa singer, Dauda Rarara. After a sustained gun duel with The post DSS kills kidnapper of mother of Hausa singer Rarara appeared first on The Nation Newspaper...

Similar articles

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Subscribe to our newsletter

Spread the love