The Mexican Peso is facing a tough time against the US Dollar as inflation remains above Banxico’s target range despite recent declines. The USD/MXN pair is trading at 19.42, up 0.81% for the day.

The recent data from Instituto Nacional de Estadistica Geografia e Informatica (INEGI) showed a drop in August’s inflation figures, hinting at a possible rate adjustment by Banxico in the upcoming meeting. Additionally, Mexico’s GDP growth for the second quarter of 2024 slowed down, indicating a tepid economy.

On the other hand, the US Dollar is strengthening due to positive labor market data and hints from Federal Reserve officials about potential rate cuts in September. This has put further pressure on the Mexican Peso.

Key Market Movements and Technical Analysis

Key highlights include Mexico’s GDP growth of 2.1% in Q2 2024, lower than expected, and August’s inflation figures showing a decrease. In the US, labor market data remains strong, while manufacturing PMI contracted but services PMI expanded.

Technically, the USD/MXN pair is on an uptrend and could aim for 19.50. If this level is breached, the Peso could weaken further towards 20.00 and beyond. On the downside, a drop below 19.00 could attract sellers and push the pair towards 18.48 and 17.75.

Analysis and Implications

The ongoing struggles of the Mexican Peso against the US Dollar are primarily driven by inflation concerns and economic deceleration in Mexico. These factors, combined with strong US economic indicators and potential rate cuts by the Fed, are creating a challenging environment for the Peso.

For investors and traders, it is crucial to monitor Banxico’s actions, US economic data, and technical levels in the USD/MXN pair to make informed decisions. The Peso’s performance can have implications on trade balances, investment strategies, and overall market sentiment. Stay updated with the latest developments to navigate through the volatile currency markets effectively.

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