- The USD/MXN has reacted to the upside, driven by a rebound in the Dollar Index (DXY).
- The inflation figure for the first half of July will be released tomorrow and is expected to stand at 0.38%.
- The June Trade Balance will be published next Friday, and in May it recorded a capital gain of $1,995 million.
The USD/MXN recorded an intraday low of 17.92 during the European session, where it attracted aggressive buyers who pushed the pair to a daily high of 18.10 during the American session. At the time of writing, the US Dollar vs. Mexican Peso price is trading at 18.06, gaining 0.65% on the day.
Investors will focus on Mexico’s inflation data
The National Institute of Geography and Statistics (INEGI) will publish tomorrow the inflation data for the first half of July. The consensus of analysts expects an increase of 0.38% compared to 0.21% in their previous reading. On the other hand, the underlying inflation for the first half of July is expected to be 0.17%, in line with its previous record.
Mexico’s Merchandise Trade Balance will be published next Friday, which showed a surplus of 1.991 billion dollars in May. In the first five months of 2024, the Trade Balance has shown a deficit of 4.461 billion dollars.
Technical levels in the USD/MXN
The USD/MXN has consolidated in a range near 18.00, establishing short-term resistance at 18.11 and support at 17.82. The next support is located at 17.60, given the pivot point of July 12.
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.
