- Analytics
- News and Tools
- Market News
- Mexican Peso loses a step against the US Dollar as inflation climbs in Mexico
Mexican Peso loses a step against the US Dollar as inflation climbs in Mexico
- Mexican Peso reverses its course and registers losses as the USD/MXN hovers near the 100-day Simple Moving Average (SMA).
- Mexico's inflation ticked up in November, which could prevent Banxico from easing policy as soon as they projected.
- US labor market data revealed during the week continued to cool down; USD/MXN traders eye US Nonfarm Payrolls.
Mexican Peso (MXN) is dipping modestly against the US Dollar (USD) in early trading during Thursday's New York session. Economic data from Mexico suggests the Bank of Mexico (Banxico) would likely need to keep interest rates higher, not just for “some time,” as the central bank stated in its latest monetary policy statement, which could keep the USD/MXN trading below the 18.00 figure. At the time of writing, the exotic pair changes hands at 17.32 and gains 0.30%.
Mexico's National Statistics Agency (INEGI) revealed that inflation rose in November, though core readings dipped. The USD/MXN has been underpinned by a rise in US Treasury bond yields. However, the Greenback (USD) remains weak, as shown by the US Dollar Index (DXY), which is down 0.33% on the day at 103.81.
Daily digest market movers: Mexican Peso on the backfoot despite rising inflation in Mexico
- Mexico's Consumer Price Index (CPI) in November rose 4.32% YoY, exceeding September’s 4.26%, though still below the forecast of 4.40%. The Core CPI, usually sought by central banks as a more stable measure of price stability, slowed from 5.5% to 5.30% in the twelve months to November, below forecasts of 5.34%.
- In recent interviews, Banxico's Governor Victoria Rodriguez Ceja and Deputy Governor Jonathan Heath commented that they could ease policy if the disinflation process advances. Contrarily to that, Deputy Governor Irene Espinosa pushed back and said inflationary risks remain and are growing.
- In the US, the labor market continues to cool down due to recently released data. The US Challenger Job Cuts revealed that US employers cut 45.51K jobs, exceeding October’s 36.836K.
- In the same tenor, Initial Jobless Claims for the week ending December 2 came at 220K, below estimates of 222K but above the prior week’s 219K.
- Jobless claims, summed to the latest JOLTs and ADP figures, added to softer inflation readings, led financial markets to conclude the Federal Reserve (Fed) has ended its tightening cycle. Therefore, market participants had already begun to price in more than 100 bps of cuts for 2024
- Money market futures projects the US Federal Reserve would slash rates by 135 basis points toward December 2024.
Technical Analysis: Mexican Peso weakens against the US Dollar as the USD/MXN struggles around the 100-day SMA, key resistance level
The USD/MXN edges up and meanders at around the 100-day SMA at 17.38, which, once cleared, could open the door for a move toward the psychological 17.50 figure. If buyers reclaim the latter, the 200-day SMA at 17.55 will be exposed, followed by the 50-day SMA at 17.67.
Conversely, if USD/MXN remains below the 100-day SMA, the downtrend would remain intact, with the first support level seen at the current week’s low of 17.16. Once cleared, the next demand area would be the 17.00/05 range.
Mexican Peso FAQs
What key factors drive the Mexican Peso?
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
How do decisions of the Banxico impact the Mexican Peso?
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall 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.
How does economic data influence the value of the Mexican Peso?
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
How does broader risk sentiment impact the Mexican Peso?
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
