Mexican Peso slips as US Dollar stabilizes following Banxico’s dovish comments

• Mexican Peso ticks down as US Durable Goods Orders jump and Consumer Confidence steadies.
• Banxico’s dovish stance remains with Governor Rodriguez hinting at possible future rate cuts amidst inflation concerns.
• USD/MXN tests key support levels with potential for further movement on Banxico actions and US data insights.

The Mexican Peso is losing momentum and falling against the US Dollar on Tuesday as the North American session begins. The Greenback pares earlier losses amid a slightly busy economic docket in the United States (US). A risk-off impulse prompted traders to seek some safety after consumer confidence remained steady, while Durable Goods Orders increased the most since 2022. The USD/MXN trades at 16.68, up 0.06%.

Mexico’s economic schedule is scarce, but it will gather pace on Wednesday. According to the consensus, the Balance of Trade is expected to show a narrower deficit in February, from $-4.31 billion to $-0.2 billion. The Unemployment Rate is foreseen dipping from 2.9% to 2.8% for the same period.

Banxico Governor Victoria Rodriguez Ceja remained dovish via an interview with El Financiero. Rodriguez commented that the battle against inflation hasn’t been concluded, though adding that in upcoming meetings, they would discuss further rate cuts to the main reference rate.

Daily digest market movers: Mexican Peso retreats as US Dollar recovers

• Banxico Governor Victoria Rodriguez Ceja said, “When macroeconomic conditions and the inflationary outlook allow us to make additional adjustments to the reference rate to the one we already have, I consider that they would be gradual.”
• Mexico’s economy contracted for the fourth time in January.  The Indicator of General Economic Activity plunged -0.6% MoM, below estimates of a 0.3% expansion, and slowed compared to December, missing estimates of 2.6% to print at 2%. Inflation in Mexico exceeded estimates of 4.45%, increasing by 4.48%, while core figures jumped above the consensus of 4.62% YoY to 4.69%.
• The outlook in Mexico suggests the economy is stagnating. A weak retail sales report, private spending falling sharply, and a contraction in economic activity justified Banxico’s rate cut. Nevertheless, they face stubbornly stickier inflation, keeping policymakers on their toes.
• Federal Reserve policymakers had been crossing the wires. Atlanta Fed President Raphael Bostic remains hawkish by supporting just one rate cut in 2024. Fed Governor Lisa Cook echoed Bostic’s comments and added that cutting too soon increases the risk of inflation becoming entrenched.
• Chicago Fed President Austan Goolsbee remains dovish, expecting three cuts, though he said he needs more evidence of inflation “coming down.”
• US Durable Goods Orders rose for the first time in three months from -0.3% MoM to 0.6% in February, an indication that companies are slightly optimistic about the economy.
• The Conference Board (CB) showed that Consumer Confidence in March deteriorated from 104.8 to 104, below estimates.

Technical analysis: Mexican Peso is subdued as USD/MXN oscillates around 16.60/70

The USD/MXN downtrend remains intact, though it seems the exotic pair is consolidating within the 16.60/16.70 area. If sellers push prices below last year’s 16.62, that could exacerbate a drop to challenge October’s 2015 low of 16.32. Further support lies in the psychological 16.00 figure.

For a bullish scenario, traders must reclaim the last week’s high of 16.94, ahead of the 17.00 figure. Up next would be the 50-day Simple Moving Average (SMA) at 17.00, the 100-day SMA at 17.09, and the 200-day SMA at 17.20.

USD/MXN Price Action – Daily Chart