- USD/MXN retreats to daily lows at 17.68.
- The US dollar is up against its main rivals but is moderating against the Mexican peso.
- US retail sales and export and import prices are mixed.
The USD/MXN opened Tuesday’s session testing a daily high at 17.80, but slowly eased back to fall to daily lows of 17.68 following the release of several US data. At the time of writing, the pair is trading above 17.70, down 0.28% on the day.
US Dollar Reacts Higher Following US Retail Sales
U.S. retail sales stalled at 0% in June, as expected, but the May reading was revised up, showing a rise of 0.3% from 0.1% previously. Excluding vehicles, the indicator rose 0.4%, above the previous 0.1% estimate. In addition, retail control rose 0.9%, five-tenths above the 0.4% increase in May.
On the other hand, US import prices stagnated at 0% m/m in June, below the expected 0.2% increase, while on an annual basis they rose 1.6%, exceeding the 1.1% increase in May. Export prices fell 0.5% m/m after declining 0.7% the previous month. The year-on-year indicator rose 0.7% compared to the previous 0.6%.
He The Dollar Index (DXY) reacted to the upside after this batch of data, rising to a two-day high of 104.51 from the 104.20 area. The CME Group’s FedWatch tool already raises the probability of a first interest rate cut in September to 93.3%, especially after the words of Jerome Powell, president of the Fed, when he acknowledged yesterday in Washington that the latest inflation readings represent greater progress.
In Mexico, the National Institute of Statistics and Geography (INEGI) published the monthly survey of the manufacturing industry, showing that in May the number of employed personnel in the sector did not show a monthly variation compared to April, although the hours worked rose by 0.3% and wages by 1.5%. The annual indicator showed that the number of employed personnel fell by 1.9% and the hours worked fell by 1.6% while wages rose by 4.0%.
USD/MXN Price Levels
On the downside, USD/MXN will find support at 17.60, last week’s low touched on Friday, before falling towards 17.22, where the 100-day moving average is located.
On the other hand, a further upward push will find initial resistance at the psychological zone of 18.00 before advancing towards the area around 18.50, where the July highs tested on the 2nd are located.
US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the de facto currency of a significant number of other countries where it is in circulation alongside local banknotes. As of 2022, it is the most traded currency in the world, accounting for over 88% of all global foreign exchange transactions, equivalent to an average of $6.6 trillion in daily transactions. Following World War II, the USD took over from the British Pound as the world’s reserve currency.
The single most important factor influencing the value of the US dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and to promote full employment. Its main tool for achieving these two goals is to adjust interest rates. When prices rise too quickly and inflation exceeds the Fed’s 2% target, the Fed raises rates, which helps the dollar. When inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a jammed financial system. It is an unconventional policy measure used when credit has dried up because banks are not lending to each other (for fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE typically leads to a weakening of the US dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal of maturing securities in new purchases. It is generally positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
