Mexican Peso Collapses as USD/MXN Climbs Past 19.50

  • Overview: The Mexican Peso experienced a significant drop against the US Dollar during the North American session, with the USD/MXN reaching 19.66 after bouncing from daily lows of 19.33. This movement was driven by a strengthening of the Greenback due to risk aversion in the market.
  • Market Sentiment: The overall sentiment in the market was downbeat, impacting risk-sensitive currencies like the Peso. Traders relied on US data as economic indicators in Mexico were scarce. Inflation expectations in the US rose slightly, influencing the exchange rate.
  • IMF Forecast: The International Monetary Fund (IMF) predicted that Mexico’s economy would grow by 1.5% in 2024, citing capacity constraints and tight monetary policy. However, the forecast for 2025 shows a further deceleration to 1.3%, with inflation expected to align with the Bank of Mexico’s 3% target.

Insights and Analysis:

Factors Influencing USD/MXN Exchange Rate:

  • The IMF forecast for Mexico’s economy growth
  • Inflation risks and economic slowdown in the US
  • Remarks by San Francisco Fed President Mary Daly hinting at possible rate cuts

Upcoming Economic Events:

  • Balance of Trade release on Wednesday
  • Retail Sales, Initial Jobless Claims, and Industrial Production data on Thursday
  • Further speeches by Fed officials

Analysis of Market Movers:

  • The weakening of the Mexican Peso due to Consumer Confidence decline and IMF forecast
  • Expectations of rate cuts by Banxico and projected USD/MXN exchange rate
  • Negative economic data from the New York Empire State Manufacturing Index
  • Investor sentiment indicating potential Fed easing by year-end

Technical Outlook for USD/MXN:

The USD/MXN uptrend continues, with momentum favoring buyers as indicated by the Relative Strength Index (RSI). Key levels to watch include:

  • Resistance at 19.82, followed by 20.00 and 20.22
  • Support at 19.61, 19.10, and 19.00, with further support at the 100-day SMA at 18.78

Mexican Peso FAQs:

  • Factors influencing the Mexican Peso value, including economic performance, central bank policy, foreign investment, remittances, and geopolitical trends
  • Role of Banxico in maintaining inflation levels through interest rate adjustments
  • Impact of macroeconomic data releases on MXN valuation and currency strength
  • Behavior of MXN as an emerging-market currency during risk-on and risk-off periods
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