- USD/MXN rises to a daily high of 17.09 after hitting nine-day lows of 17.02
- The price of the Dollar strengthens thanks to the increase in PPI inflation.
- US producer prices rise more than expected in January.
USD/MXN fell at European midday on Friday to a nine-day low of 17.02. Shortly after, the pair slowly regained ground, accelerating its rise following the US PPI announcement, which revealed a higher than expected rise in producer prices. The Dollar reached a daily high of 17.09 Mexican pesos after the publication.
The increase in IPP inflation once again gives momentum to the Dollar
The Dollar Index (DXY) has risen strongly after the data, shooting from 104.40 to 104.67, a new high for the day. At the time of writing, the greenback index is trading above 104.55, gaining 0.28% on the day.
The United States Producer Price Index (PPI) has risen 0.9% in the year-on-year reading for January. The figure is above the 0.6% expected by the market. Core producer prices, excluding food and energy, increased 2% annually, exceeding December's 1.7% and the estimated 1.6%
On the other hand, housing starts in the United States fell 14.8% during the month of January after growing 3.3% in December. This is the first drop recorded by the indicator after four months of increases. In addition, we are facing the steepest decline since April 2020. Construction permits fell 1.5% after rising 1.8% the previous month.
The IPP data has given strength to the Dollar because it favors market bets on a delay in the start of interest rate cuts by the Federal Reserve United States. Inflation remains persistent at the beginning of 2024, potentially delaying the start of moderation in the Fed's monetary policy to the second half of the year. According to the CME Group's FedWatch tool, the options for a first cut in March are slim. 8.5%, while the probabilities in May are reduced to 28.4%. In June, the chances of a rate cut are below 50%, at 49.8%.
USD/MXN price levels
The USD/MXN is trading at the end of the week above 17.07, gaining 0.14% during the day. In case the Dollar manages to extend its advance, the first resistance will be at 17.22, the high of February 13. A breakout of this zone can take the pair towards 17.28 first (February top) and 17.38 later (2024 high recorded in January).
On the downside, the main support awaits at the psychological level of 17.00. Below, the USD/MXN can extend its decline towards 16.78, the 2024 floor recorded on January 8.
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.
