- The Mexican weight is generally stabilized before the renewed strength of the USD after a judicial ruling that blocks Trump’s tariffs.
- The operators focus on the minutes of the Banxico meeting and the US unemployment applications as possible next catalysts for the USD/MXN torque.
- The USD/MXN breaks the previous psychological resistance in 19.40.
The Mexican weight (MXN) oscillates between slight profits and losses against the US dollar (USD) on Thursday, while the markets digest a judicial ruling that blocks the president of the US, Donald Trump, to impose import tariffs.
At the time of writing, the USD/MXN is quoted in an adjusted range with psychological support strengthening in 19.40.
A Federal Court of the US failed against the broad “Liberation Day” tariffs of President Trump, considering them illegal under emergency powers. While the decision raised the feeling of global risk, it also promoted the US dollar and highlighted the continuous uncertainty around commercial policy between the US and Mexico, which weighs even more about the peso.
Also supporting the US dollar, the minutes of the May meeting of the Federal Reserve (FED) revealed on Wednesday that those responsible for the policy are prepared to keep the interest rates high longer if the inflationary pressures persist.
At the same time, the quarterly report of the Bank of Mexico (Banxico) pointed out the increase in domestic recession risks, drastically cutting the GDP growth projection by 2025 to 0.1% and reinforcing a cautious political perspective.
On Thursday, key economic releases for the US include the second estimate of the Gross Domestic Product (GDP) of the first quarter and the initial weekly unemployment applications, which are expected to influence the policy perspective of the Federal Reserve. Meanwhile, in Mexico, attention focuses on the minutes of the Bank of Mexico meeting, which is expected to provide a deeper vision about the thinking of those responsible for politics after the recent reduction in growth projections.
Daily summary of the Mexican weight: USD/MXN expects signals from Banxico
- At the May meeting, the governor of Banxico, Victoria RodrÃguez Ceja, said that the Governing Board estimates that it could continue to calibrate the monetary position and consider adjusting it in an amount similar to the reduction of 50 basic points in May. The minutes of the meeting, which will be published at 15:00 GMT, can provide additional clues about the next movement of Banxico in their attempt to balance inflation and economic growth.
- On Wednesday, the tone of the minutes of the Open Market Committee of the Federal Reserve (FOMC) aligned with market expectations, since those responsible for the policy emphasized the need to evaluate the total impact of commercial measures and inflationary pressures before adjusting the policy. “The participants agreed that the uncertainty about the perspectives had increased and that it was appropriate to adopt a cautious approach to monetary policy,” said the minutes.
- According to the CME Fedwatch tool, market participants are currently assessing 48.3% the possibility of a rate cut in September. For June and July meetings, the Fed is expected to maintain its reference rate in the current range of 4.25%-4.50%.
- The quarterly Banxico report for January-March recognized the increase in recession risks for the Mexican economy, lowering the growth projection of GDP by 2025 from 0.6% to 0.1%. Despite the reduction, the Central Bank maintained a cautious political position. He said: “The reference rate is expected to remain in restrictive territory for a prolonged period”, suggesting that future cuts will be gradual and dependent on the data.
- The figures of the Personal Consumption Expenditure Index (PCE) April – The Fed – and Final Figures of the Fire of the Consumer Sent of the University of Michigan are scheduled for publication on Friday. With the Fed reiterating its “data -dependent” position, these data points are crucial to understand the inflation and feeling of the consumer.
Technical analysis of the Mexican weight: USD/MXN finds support in 19.40
The USD/MXN is trying to break decisively above the previous technical resistance in 19.40, a level that has limited the upward potential of the torque in recent days.
In the anticipation of Wednesday’s FOMC minutes, the US dollar was strengthened against weight, allowing him to overcome the resistance of the previous trend line in 19.29 and the simple mobile average (SMA) of 10 days about 19.34.
With these levels now at stake as support, the bulls are preparing for a new 20 -day SMA test in 19.45. A rupture of this level and the minimum of April 23 in 19.47 could open the door to 19.58, which is aligned with the Fibonacci recoil level of 78.60% of the movement from October to February.
USD/MXN daily graph
Mexican weight FAQS
The Mexican weight (MXN) is the most commercialized currency among its Latin American peers. Its value is widely determined by the performance of the Mexican economy, the country’s central bank policy, the amount of foreign investment in the country and even remittance levels sent by Mexicans living abroad, particularly in the United States. Geopolitical trends can also affect MXN: for example, the Nearshoring process (or the decision of some companies to relocate the manufacturing capacity and supply chains closer to their countries of origin) is also considered a catalyst for the Mexican currency, since the country is considered a key manufacturing center in the American continent. Another catalyst for MXN is oil prices, since Mexico is a key exporter of the raw material.
The main objective of the Central Bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%). To do this, the bank establishes an adequate level of interest rates. When inflation is too high, Banxico will try to control it by raising interest rates, which makes the indebtedness of homes and companies more cooling, thus cooling the demand and the economy in general. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes 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 weight (MXN). A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only attracts more foreign investment, but it can encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this fortress is accompanied by high inflation. However, if the economic data is weak, the MXN is likely to depreciate.
As an emerging market currency, the Mexican weight (MXN) tends to rise for periods of risk, or when investors perceive that the general market risks are low and, therefore, are eager to participate in investments that carry a higher risk. On the contrary, the MXN tends to weaken at times of market turbulence or economic uncertainty, since investors tend to sell higher risk assets and flee to the most stable safe shelters.
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.
