- The Mexican Peso falls after Trump’s appointments of Mike Waltz and Marco Rubio.
- Banxico is expected to cut rates by 25 bps amid rising tensions between the US and Mexico.
- Upcoming US inflation and retail sales data will impact the USD/MXN currency pair.
The Mexican Peso extends its losses against the Dollar on Tuesday due to risk aversion over US President-elect Donald Trump’s first appointments to his cabinet. Trump’s campaign proposals to raise tariffs and cut taxes are prone to inflation, which would put pressure on the Federal Reserve (Fed) to keep rates higher than they would otherwise be. At the time of writing, USD/MXN is trading at 20.62, gaining 1.38%.
Risk aversion due to Trump’s appointment of Mike Waltz as National Security Advisor and Marco Rubio as Secretary of State hurt the outlook for the Mexican currency, which has fallen more than 2% since Monday. Waltz and Rubio are known for their tough stance on China, hinting that tariffs will likely be imposed.
Mexico’s economic calendar remains absent, although USD/MXN traders are keeping an eye on the Bank of Mexico’s (Banxico) monetary policy decision on November 14. According to Reuters, 19 out of 20 economists expect a 25 basis point (bp) rate cut in the main benchmark interest rate, lowering it to 10.25%.
On Monday, Mexican Economy Secretary Marcelo Ebrard suggested that the Mexican government could retaliate with its own tariffs on US imports. He stressed that the tariffs would increase prices in the US.
Recently, Fed officials crossed lines. Governor Christopher Waller did not comment on monetary policy. In contrast, Richmond Fed President Thomas Barkin stated that “inflation could be under control or could be at risk of being stuck above the Fed’s 2% target.”
This week, Mexico’s economic agenda will include Banxico’s policy decision. On the US front, Fed speeches, inflation on the consumer and producer side, and retail sales will dictate the direction of the USD/MXN pair going forward.
Daily Market Summary: Mexican Peso on Defensive Ahead of US CPI
- USD/MXN has risen as the US Dollar Index (DXY), which tracks the performance of the US currency against six others, rises to a six-month high of 106.15, up more than 0.60%.
- Mexico’s October consumer confidence, released Monday, shows Mexicans are slightly more optimistic about the economy.
- September industrial production figures were mixed as traders prepare for Banxico’s monetary policy decision.
- The US Consumer Price Index (CPI), which will be revealed on November 13, is expected to rise 2.4% to 2.6% year-on-year and is projected to remain unchanged in the month-on-month figures at 0.2%.
- The core CPI is projected to stagnate in the annual and monthly figures, each at 3.3% and 0.3%.
- Data from the Chicago Board of Trade, via the December federal funds rate futures contract, shows that investors are estimating a 23 bp easing by the Fed by the end of 2024.
USD/MXN Technical Outlook: Mexican Peso Plunges Again as USD/MXN Rises Above 20.50
The USD/MXN bullish trend remains intact, with the Dollar extending its gains sharply, threatening to challenge the year-to-date (YTD) high of 20.80 reached on November 6. If broken, the next resistance would be the psychological figure of 21.00, followed by the March 8, 2022 peak at 21.46.
On the contrary, sellers must push the exchange rate towards the 20.00 figure, if they wish to challenge the 50-day SMA at 19.70. With additional weakness, the next support for USD/MXN would be the psychological figure at 19.50, followed by the October 14 low of 19.23.
The Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is largely determined by the performance of the Mexican economy, the policy of the country’s central bank, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans living abroad, particularly in the United States. . Geopolitical trends can also affect the MXN: for example, the nearshoring process (or the decision by some companies to relocate manufacturing capacity and supply chains closer to their home countries) is also seen as a catalyst for the currency. Mexican, as the country is considered a key manufacturing center on the American continent. Another catalyst for the MXN is oil prices, as Mexico is a key exporter of the raw material.
The main objective of Mexico’s central bank, also known as Banxico, is to keep inflation at low and stable levels (at or near its target of 3%, the midpoint of a tolerance band between 2% and 4%. %). To do this, the bank establishes an appropriate level of interest rates. When inflation is too high, Banxico will try to control it by raising interest rates, which makes borrowing more expensive for households and businesses, thus cooling demand and the economy in general. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN.
The publication of macroeconomic data is key to evaluating the state of the economy and can have an impact on the valuation of the Mexican peso (MXN). A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for the MXN. Not only does it attract more foreign investment, but it may encourage the Bank of Mexico (Banxico) to raise interest rates, particularly if this strength is accompanied by high inflation. However, if economic data is weak, the MXN is likely to depreciate.
As an emerging market currency, the Mexican Peso (MXN) tends to rise during periods of risk, or when investors perceive overall market risks to be low and are therefore eager to engage in investments that carry higher risk. . Conversely, the MXN tends to weaken in times of market turbulence or economic uncertainty, as investors tend to sell riskier assets and flee to more stable safe havens.
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.
