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