- USD/MXN falls to new five-week lows at 16.99.
- The Dollar weakens after the rebound in European yields.
- Focus on FOMC Minutes to be released on Wednesday.
The USD/MXN began the day on Tuesday trading around the 17.06 zone, the daily high, but in the middle of the European session it began to lose ground until falling at the opening of Wall Street to a five-week low of 16.99. The pair had not touched such a low level since January 16. At the time of writing, the Dollar is equivalent to 17.00 Mexican pesos, losing 0.20% on the day.
The dollar falls on the possibility that the European Central Bank could cut rates before the Fed
The US Dollar (USD) is turning deep red at the Wall Street open as markets eye rising European yields against stable US rates. The rebound in yields in the Eurozone comes after the European Central Bank report that wages in the region are high and remain strong, which could prompt the ECB's first rate cut sooner than expected in a principle.
The Dollar Index (DXY) has plunged following this information below the 104.00 area, falling to 103.87, a new low since February 2. At the time of writing, the USD index is trading around 103.90, losing 0.35% daily.
The CME Group's FedWatch tool maintains the chances of a rate cut by the Federal Reserve in March at 8.5%, while placing the options of a first rate cut in May at 34.4%. The chances for a first June drop rise to 53.7% from 51.7% yesterday.
USD/MXN traders await the publication of the Federal Reserve's Minutes on the January monetary policy meeting, which will be published tomorrow, Wednesday, potentially giving clues about what FOMC members think regarding the start of rate cuts . Tomorrow Mexico will publish figures on the mining and metals industry and the monthly surveys on services and commercial companies for the month of December.
USD/MXN Price Levels
With a clearly bearish trend in short-term charts and after having broken the psychological level of 17.00, the USD/MXN could extend its decline towards the support located at 16.78, the 2024 minimum reached on January 8. Below this level, the fall could head to 16.69/16.70, where the lows of the end of August 2023 are, and subsequently to 16.62, the bottom of 2023 and the last eight years.
To the upside, the first resistance awaits at 17.06, this week's ceiling. Above, the barrier located at 17.22, the maximum of February 13, awaits. A break of this level can take the pair towards 17.28 (February top) and 17.38 later (2024 high recorded in January).
Mexican Peso 15-Minute Chart
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Frequently Asked Questions about the Mexican Peso
What is MXN?
The Mexican Peso is the legal tender of Mexico. The MXN is the most traded currency in Latin America and the third most traded on the American continent. The Mexican Peso is the first currency in the world to use the $ sign, prior to the later use of the Dollar. The Mexican Peso or MXN is divided into 100 cents.
What is Banxico and how does it influence the MXN?
Banxico is the Bank of Mexico, the country's central bank. Created in 1925, it provides the national currency, the MXN, and its priority objective is to preserve its value over time. In addition, the Bank of Mexico manages the country's international reserves, acts as a lender of last resort to the banks and advises the government economically and financially. Banxico uses the tools and techniques of monetary policy to meet its objective.
How does inflation impact the MXN?
When inflation is high, the value of the Mexican Peso (MXN) tends to decrease. This implies an increase in the cost of living for Mexicans that affects their ability to invest and save. At a general level, inflation affects the Mexican economy because Mexico imports a significant amount of final consumption products, such as gas, fuel, food, clothing, etc., and a large amount of production inputs. On the other hand, the higher the inflation and debt, the less attractive the country is for investors.
How does the Dollar influence the Mexican Peso (MXN)?
The exchange rate between the USD and the MXN affects imports and exports between the United States and Mexico, and may affect demand and trade flows. The price of the Dollar against the Mexican Peso is affected by factors such as monetary policy, interest rates, the consumer price index, economic growth and some geopolitical decisions.
How does the Fed's monetary policy affect Mexico?
The exchange rate between the USD and the MXN affects imports and exports between the United States and Mexico, and may affect demand and trade flows. The price of the Dollar against the Mexican Peso is affected by factors such as monetary policy, interest rates, the consumer price index, economic growth and some geopolitical decisions.
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.
