- The Mexican Peso gains some traction against the US Dollar, although it remains close to Friday’s close.
- The US dollar maintains its rate after Michelle Bowman’s statements.
- The focus of the week will be on employment data from Mexico and the United States.
The price of the US Dollar has lost traction this Monday against the Mexican Peso, although it has maintained its position above 19.50. USD/MXN has swung between a daily high near 19.75 and a low of 19.55. At the time of writing, the pair is trading above this floor, losing 0.57% on the day.
US Dollar receives support from Fed member Michelle Bowman
The US Dollar Index (DXY) has rebounded in recent hours, after an initial drop. The greenback has fallen to 100.18, but has then boosted to 100.67. The trigger for the movement was the statement by Michelle Bowman, a member of the Board of Governors of the US Federal Reserve, who noted that inflation “continues uncomfortably above the 2% target.” Following the comment, the CME Group’s FedWatch tool places the probability of a 25 basis point cut by the Fed in November at 59.4%, while the options for a 50 bp cut are at 40.6%.
Traders of the Dollar against the Mexican Peso will await the key data of the week for more volatile movements. The United States will publish September Nonfarm Payrolls on Friday, but ADP private employment data will be released first. Mexico will also publish its August unemployment rate on Friday as well.
USD/MXN Price Levels
The Dollar maintains its upward trend firmly against the Mexican Peso in medium and long-term charts. Initial resistance in case of a recovery of the pair is at 19.75, last week’s high. Higher up we will find a strong barrier in the 20.00/20.15 zone, a psychological zone and this year’s maximum recorded in September.
To the downside, initial support is at today’s low of 19.55, which converges with the 100-period moving average on the one-hour chart. A break of this level could trigger a move towards the 19.00 level.
The 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. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling 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: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of 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 into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of 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 usually leads to a weakening of the US Dollar.
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually 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.
