The Mexican Peso’s Decline: Impact of Risk-off Mood and US Economic Data
- Reasons for Mexican Peso’s drop: The Mexican Peso weakened against the US Dollar due to high US Treasury yields supporting the Greenback, coupled with China’s stimulus program falling short of market expectations.
- Upward trend in USD/MXN: The USD/MXN pair trades at 19.35, up over 0.50%, driven by the prevailing market conditions.
- Key Events Affecting Mexican Peso: Traders are closely watching Mexico’s September inflation data release and Banxico meeting minutes, with expectations of further rate cuts by year-end.
Insights into Mexico’s Economic Landscape and Monetary Policy Outlook
- Output Gap Projection: Banxico’s Deputy Governor Omar Mejia hinted at a negative output gap by late 2024, which could impact future inflation rates.
- Inflation Forecasts: Analysts predict a decline in Mexico’s Consumer Price Index (CPI) for September, with expectations of further decreases in the Core CPI as well.
- Monetary Policy Decisions: Banxico is anticipated to continue lowering rates, with future cuts potentially being more substantial if inflation rates continue to decrease.
US Economic Factors Influencing Market Sentiment
- US Nonfarm Payrolls Report: The recent report led the Federal Reserve to adjust its rate cut expectations, impacting market dynamics.
- Future Fed Actions: Fed officials’ statements and market reactions indicate the potential for further interest rate cuts based on inflation trends.
Market Analysis and Forecast for the Mexican Peso
Despite recent developments, the USD/MXN pair remains upwardly biased, with potential for further gains. Key technical levels to watch in the near term include:
- Resistance Levels: Psychological level of 19.50, October 1 high of 19.82, and YTD peak of 20.22.
- Support Levels: October 4 low of 19.10, 19.00 figure, and 100-day SMA at 18.64.
Banxico FAQs: Understanding Mexico’s Central Bank
- Role of Banxico: Mexico’s central bank aims to maintain currency value and set monetary policy to ensure low and stable inflation levels.
- Interest Rate Policy: Banxico uses interest rate adjustments to regulate inflation levels, impacting the strength of the Mexican Peso.
- Meeting Frequency and Influence: Banxico’s policy decisions are closely tied to the US Federal Reserve’s actions, impacting market expectations.