CFD Trading Rate US Dollar vs Mexican Peso (USDMXN)

• USD/MXN extends losses as US Dollar depreciates on risk-on sentiment.
• The downbeat US Treasury yields contribute to downward pressure for the Greenback.
• MXN is expected to retain its strength for an extended duration as the Mexican elections are on the horizon.

USD/MXN moves into negative territory to extend losses to near 17.06 during the European session on Thursday. This decline in the US Dollar (USD) against the Mexican Peso (MXN) is attributed to decreasing US Treasury yields, which are influenced by improved risk appetite.

At present, the 2-year and 10-year US yields are at 4.56% and 4.23%, respectively, as market participants are analyzing the Federal Reserve's monetary policy outlook amidst robust inflation data and recent statements from Fed officials.

Chicago Fed President Austan Goolsbee's remarks on Wednesday aimed to ease market concerns by suggesting that higher-than-expected consumer prices do not necessarily rule out the possibility of the Federal Reserve considering interest rate cuts in 2024.

Federal Reserve Vice Chair for Supervision Michael Barr has also drawn attention by reaffirming the Federal Reserve's confidence, along with its core Federal Open Market Committee, in the trajectory of US inflation towards the Fed's 2% target.

Earlier this week, Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja stated in an interview that inflation is projected to resume its downward trajectory. She added that inflation is expected to reach Banxico's 3% target by 2025.

The Mexican Peso is poised to maintain its strength over an extended period, especially with Mexico's upcoming elections looming. Claudia Sheinbaum, the chosen representative of MORENA and favored candidate of Andrés Manuel López Obrador, is expected to secure the presidency in June.

These elections are likely to prioritize policy continuity, with Sheinbaum anticipated to pursue a technocratic approach to policymaking aimed at mitigating domestic political risks. Considering both monetary policy trends and the contained election risks, the Mexican peso is expected to remain robust in the long term.

• USD/MXN could find immediate support at the seven-day EMA at 17.13 followed by the weekly low at 17.04.
• Technical analysis suggests a confirmation of the bullish sentiment towards an upward trend.
• The key resistance appears around the 23.6% Fibonacci retracement at 17.18 followed by the major support at 17.50 level.

USD/MXN snaps the recent gains and edges lower to near 17.16 during the European hours on Wednesday. The immediate support appears at the seven-day Exponential Moving Average (EMA) at the 17.13 level.

A break below the latter could put pressure on the USD/MXN pair to navigate the major support region around the weekly low at 17.04 aligned with the major level and February’s low at 17.00 level.

The 14-day Relative Strength Index (RSI), a momentum oscillator that measures the speed and change of price movements is positioned above the 50 mark, indicating the bullish momentum for the USD/MXN pair.

Additionally, Additionally, the lagging indicator “Moving Average Convergence Divergence (MACD)” lies above the centerline and the signal line, which suggests a confirmation of a bullish sentiment towards an upward trend.

On the upside, the USD/MXN pair could find the immediate resistance at the 23.6% Fibonacci retracement at 17.18 followed by the 38.2% Fibonacci retracement at 17.43, in conjunction with the major support at the 17.50 level. A breakthrough above the major barrier could lead the USD/MXN pair to explore the area around the 17.60 level.

USD/MXN: Daily Chart

The Mexican Peso (MXN) has remained well anchored near the 17.00 level against the US Dollar (USD). Economists at Scotiabank analyze Peso’s outlook.

Slight bias towards a depreciation in the MXN

• USD/MXN snaps its two-day losing streak before US CPI data.
• Banxico maintains its outlook that inflation will reach its 3% target by 2025.
• The expected moderation in US inflation adds to the chance for Fed rate cuts in March.
• Annual US CPI and Core CPI are expected to decrease at 2.9% and 3.7%, respectively.

USD/MXN breaks its two-day losing streak, bolstered by a stronger US Dollar (USD) as traders exercise caution ahead of the release of US inflation data scheduled for Tuesday during the North American session. The USD/MXN pair inches higher to near 17.08 during the European session on Tuesday.

However, the Mexican Peso (MXN) may have found support as the Bank of Mexico (Banxico) adjusted its inflation projections upward for the first three quarters of 2024. They anticipate inflation to converge toward 3.5% in the fourth quarter, according to the latest monetary policy statement.

Furthermore, Banxico’s Governor, Victoria Rodriguez Ceja, expressed expectations that inflation would resume its downward trajectory and continue the disinflationary trend. She emphasized that despite recent increases over the past three months, Banxico maintains its outlook that inflation will reach its 3% target by 2025.

Governor Ceja also remarked, “The inflationary environment has evolved, and the current situation differs significantly from what we experienced in 2022, even in the initial months of 2023.” She affirmed that the central bank would base its decisions on a range of factors and data, including actions taken by the US Federal Reserve.

The anticipated moderation in US inflation for January adds to the likelihood that the Federal Reserve (Fed) may reconsider its stance on interest rate reductions at the upcoming March meeting. This expectation exerts downward pressure on yields of US Treasury bonds, subsequently weighing on the US Dollar. Consequently, the USD/MXN pair faces resistance.

The US Dollar Index (DXY), reflecting the USD's performance against a basket of six major currencies, remains steady at around 104.10. Meanwhile, the 2-year and 10-year US Treasury yields stand at 4.47% and 4.16%, respectively, by the press time.

• USD/MXN faces challenges as the Greenback declines due to downbeat US yields.
• Rabobank forecasted a 25 basis points rate cut by Banxico at the June meeting.
• The US Dollar fails to receive upward support from the hawkish remarks by the Fed officials.

USD/MXN continues to decline for the second consecutive session, trading at around 17.07 during the European session on Monday. The Mexican Peso (MXN) strengthened as headline Mexican inflation picked up pace in January, mainly driven by an increase in non-core components, while core inflation showed a decrease.

Economists at Rabobank analyze the outlook for the USD/MXN pair. Their base case scenario suggests a 25 basis points (bps) cut at the June 27 meeting, following the anticipated first cut by the US Federal Reserve (Fed) on June 12.

On the other side, the US Dollar faces pressure from downbeat US bond yields, with the US Dollar Index (DXY) slipping to around 104.00. Both 2-year and 10-year US yields are hovering at 4.47% and 4.16%, respectively, by the press time.

Dallas Federal Reserve (Fed) Bank President Lorie Logan expressed that there is presently no urgent need to reduce interest rates. Logan underscored the importance of acquiring further evidence to ensure the sustainability of progress in inflation.

This sentiment aligns with US Fed Chair Jerome Powell's rejection of the notion of a rate cut in March, as conveyed during a press conference following the interest rate decision on January 31.

The hawkish comments from the US Fed officials fail to cheer the Greenback as market participants adopt a cautious stance ahead of the US Consumer Price Index (CPI) data on Tuesday.

Banxico announced its latest rate decision on Thursday, February 8 with no change to the current 11.25% policy rate. USD/MXN reaction was fairly muted. Economists at Rabobank analyze the pair’s outlook.

USD/MXN to trade up through the 18.00 handle in H2

• USD/MXN gains ground on market caution due to the escalated tension in the Middle East.
• Prime Minister Benjamin Netanyahu refused the ceasefire offer from Hamas.
• Banxico kept its benchmark policy rate at the record-high level of 11.25%.

USD/MXN extends its upward trend for the third consecutive day, trading around 17.15 during the European session on Friday. However, the USD/MXN pair gained ground on market caution due to the escalated tension in the Middle East. Israeli Prime Minister Benjamin Netanyahu's refusal of the ceasefire offer from Hamas added to the geopolitical uncertainty.

The US Dollar Index (DXY), which gauges the performance of the US Dollar against a basket of six major currencies, appears set to continue its recent upward trajectory for the second consecutive day. However, the decline in US bond yields might be exerting some downward pressure on the Greenback.

Moreover, positive data from the US job market bolstered the Greenback further. Initial Jobless Claims in the US dropped to 218K in the week ending February 2, down from the previous week's 227K and surpassing the estimated figure of 220K. Additionally, Continuing Jobless Claims also declined to 1.871M for the week ending January 26, beating market forecasts of 1.878M from the previous reading of 1.894M.

ING economists maintain a positive outlook on the Mexican Peso (MXN). However, the USD/MXN pair encountered a hurdle following the Bank of Mexico (Banxico) interest rate decision on Thursday. During its February meeting, Banxico unanimously opted to keep its benchmark policy rate at the record-high level of 11.25%.

In January, headline inflation accelerated to 4.88% annually, primarily due to a non-core component increase, while core inflation moderated to 4.76%. Additionally, market participants will be closely monitoring Industrial Output data scheduled for release on Friday.

Banxico meets to set interest rates today. The Mexican Peso (MXN) has been one of the very few currencies to appreciate against the dollar on a total return basis this year. Economists at ING analyze MXN outlook ahead of the decision.

Strong demand to emerge for the Peso on any dips

• USD/MXN moves on a downward trajectory on a weaker US Dollar.
• Downbeat US Treasury yields contribute to weighing on the US Dollar.
• Traders await Swiss inflation data followed by the Banxico policy decision on Thursday.

USD/MXN continues its losing streak for the third successive day, trading lower around 17.03 during the European session on Wednesday. The US Dollar (USD) depreciates against the Mexican Peso (MXN) due to the decline in the US Treasury yields. That, in turn, acts as a headwind for the USD/MXN pair.

US Dollar Index (DXY) continues to lose ground, inching lower to near 104.10 with the 2-year and 10-year yields on US bond notes standing at 4.40% and 4.10%, respectively, by the press time. Nevertheless, the bearish momentum of the Greenback might have been limited by the hawkish remarks from US Federal Reserve (Fed) Chair Jerome Powell. Powell alleviated market expectations of a rate cut in March.

The Mexican Consumer Confidence data is set to be released on Wednesday by INEGI. Furthermore, inflation data is scheduled to get public on Wednesday followed by the Bank of Mexico’s (Banxico) interest rate decision, Core Inflation is expected to be eased to 0.37% in January against the 0.44% prior. However, Headline Inflation is expected to rise by 0.88%, exceeding the previous growth of 0.71%. 12-Month Inflation is anticipated to grow by 4.88%, higher than the 4.66%.

Banxico is anticipated to keep its interest rate steady at 11.25% at February’s policy meeting but a quarter-basis point rate cut is expected in March. Furthermore, markets anticipate a subsequent escalation in the scale of rate cuts by the Banxico throughout 2024.

The Mexican Peso (MXN) carved out a small gain versus the US Dollar (USD) on spot basis last week. Economists at Société Général analyze the USD/MXN technical outlook. 

16.75 is crucial support

• USD/MXN loses ground as US Dollar declines due to weaker US yields.
• Mexican Peso could weaken on future economic policies from the new administration.
• The Greenback strengthens on Fed’s hawkish stance on interest rate trajectory.

USD/MXN extends its losses for the second successive session, inching lower to around 17.10 during the early European session on Tuesday. The US Dollar (USD) loses some ground due to the downbeat US Treasury yields, which puts pressure on the USD/MXN pair.

The upcoming presidential election on June 2nd is anticipated to result in Claudia Sheinbaum of the Morena party assuming victory. Market analysts foresee a gradual depreciation of the Mexican Peso (MXN) due to anticipated uncertainties surrounding the economic policies of the incoming administration.

Additionally, their projections include a 25 basis points rate cut starting in March. Furthermore, experts anticipate a subsequent escalation in the scale of rate cuts by the Bank of Mexico (Banxico) later in 2024.

December’s PPI (YoY) reported a decline of 10.6%, against the anticipated decrease of 10.5% and the previous figure of 8.8%. While US ISM Services Prices Paid increased to the reading of 64.0 in January, from December’s reading of 56.7.

Over the weekend, Powell remarked that it was premature to ease policy, emphasizing that the task of steering inflation toward its 2% target is ongoing. He added that the Federal Reserve might consider its first rate cut around the middle of the year.

Market participants will closely observe speeches from Federal Reserve officials for additional insights into potential adjustments to monetary policy. On the Mexican front, the release of Consumer Confidence data is scheduled for Wednesday, which will be closely watched for indications of the economic outlook in Mexico.

The Mexican Peso (MXN) is the only Latin currency to be up against the Dollar on a total return basis in 2024. Economists at ING analyze USD/MXN outlook.

The market is looking for signals that Banxico is ready to pull the trigger

• USD/MXN gains ground as solid US labor data increases the possibility of no rate cut in March by the Fed.
• The recent remarks from the Fed suggest that the central bank is not inclined to pursue a rate cut in March.
• Market experts forecast a weakening of the Mexican Peso throughout 2024, citing uncertainties surrounding the economic policies.

USD/MXN continues its upward trend, reaching around 17.16 in the early European hours on Monday. These positive employment indicators contribute to the prevailing optimism regarding the likelihood of the US Federal Reserve refraining from interest rate cuts in the upcoming meeting. This sentiment has improved the US Dollar (USD) against the Mexican Peso (MXN).

US Nonfarm Payrolls increased by 353,000 jobs in January, surpassing the previous figure of 333,000 and surpassing the market consensus of 180,000. Additionally, Average Hourly Earnings (MoM) for January stood at 0.6%, exceeding the expected 0.3% and the December reading of 0.4%. The Unemployment Rate held steady at 3.7% in January, as compared to the market anticipation of 3.8%.

Recent statements from Federal Reserve officials suggest that the central bank is not inclined to pursue a rate cut in March. Jerome Powell, the Chair of the US Federal Reserve, has reiterated that implementing rate cuts during the March meeting could be premature. Additionally, Austan Goolsbee, President of the Chicago Federal Reserve (Fed) Bank, shared on Friday that he doesn't interpret the strong US job growth in January as a justification for postponing interest rate cuts. Rather, he sees it as a confirmation of the labor market's resilience, suggesting it is not on the brink of weakening.

Conversely, economists at MUFG Bank are anticipating a gradual weakening of the Mexican Peso (MXN) throughout 2024, citing uncertainties surrounding the economic policies that the next administration may adopt. The upcoming presidential election on June 2nd is expected to be won by Claudia Sheinbaum of the Morena party. Despite indications of policy continuity, there is a concern that Ms. Sheinbaum's authority could be limited by the influence of the incumbent president and other leaders within the Morena party.

In a similar vein, economists at CIBC Capital are maintaining their call for consecutive 25 basis points rate cuts starting in March. They also anticipate a later increase in the magnitude of rate cuts by the Bank of Mexico (Banxico) in late 2024, potentially bringing the overnight rate to 9.25% by the end of the year.

• USD/MXN extends its losses ahead of US employment data release.
• US Dollar could suffer losses if the US NFP declines as expected.
• The advances of the pair could be capped as Banxico is expected to cut a 25 bps rate in March.

USD/MXN loses ground for the second consecutive session, inching lower to near 17.05 during European trading hours on Friday. The mixed labor data from the United States (US) has weakened the US Dollar (USD), acting as a headwind for the USD/MXN pair.

Initial Jobless Claims for the week ending on January 26 rose to 224K, higher than the previous rise of 215K and the expected figure of 212K. The preliminary US Nonfarm Productivity appreciated by 3.2% in Q4, surpassing the expected 2.5%, but down from the previous reading of 4.9%. Furthermore, US Average Hourly Earnings and Nonfarm Payrolls (NFP), are scheduled for release on Friday.

Additionally, the subdued US Treasury yields are adding pressure on the US Dollar (USD). The downward pressure on US Treasury yields followed reports from regional bank New York Community Bancorp, revealing increased stress in its commercial real estate portfolio.

On the other side, markets are factoring in a 25 basis points (bps) interest rate cut by the Bank of Mexico (Banxico) starting in March. A survey of expectations estimates that the bank will lower rates to 9.25% by the end of 2024. Markets expect it to reach 4.17%, and economic growth is anticipated to range from 2.29% to 2.40%. However, Banxico is expected to make no interest rate adjustment in the upcoming February policy meeting.