The Mexican Peso has depreciated over 1% against the US Dollar, with the USD/MXN pair trading at 18.32 after bouncing off daily lows of 18.13. This drop comes after the National Statistics Agency (INEGI) released mixed mid-month inflation data, halting the disinflation process and raising concerns among market participants.
According to experts at ING, the carry trade favoring the emerging market currency has begun to unwind, as investors remain risk averse in the current low volatility environment. Additionally, political uncertainty looms as the Mexican Congress prepares to discuss President Andres Manuel Lopez Obrador’s judicial reform, impacting the Mexican currency.
Looking ahead, USD/MXN traders are keeping an eye on crucial US economic data, including GDP figures and the Core Personal Consumption Expenditure Price Index. Meanwhile, the US Dollar Index (DXY) has dropped 0.24% to 104.22, adding to the pressure on the Mexican Peso.
Key Market Movers and Technical Analysis
Key highlights from the market include:
- Mid-month Inflation for July rose above expectations, with prices increasing by 5.61% on a yearly basis.
- Mid-month core Inflation expanded slightly, while analysts forecast inflation to end the year at 4.30% YoY.
- Mexico’s economic growth is expected to slow to 1.9%.
- The US Dollar Index (DXY) has weakened, with traders pricing in a 100% chance of a rate cut in September.
From a technical standpoint, the USD/MXN pair is expected to extend its gains above 18.00, with resistance levels at 18.50 and 18.99. On the downside, a retreat below 18.00 could lead to a test of key support levels at 17.74 and 17.58.
Expert Insights on Banxico
The Bank of Mexico, also known as Banxico, plays a crucial role in guiding monetary policy in Mexico. By setting interest rates, Banxico aims to maintain low and stable inflation levels within target bands. The central bank’s decisions are influenced by the US Federal Reserve, with rate differentials impacting the strength of the Mexican Peso.
Overall, the recent developments in the Mexican Peso’s value against the US Dollar highlight the importance of monitoring economic data and geopolitical events for investors and traders. Understanding the factors driving currency movements can help individuals make informed decisions about their finances and investments.