- The Mexican Peso (MXN) advances against the US Dollar (USD), driven by risk appetite in the markets.
- In Mexico, inflation data for mid-November will be published, which is expected to show a slight increase in the headline CPI and a slight decrease in the core CPI.
- The Bank of Mexico (Banxico) will publish the minutes of its last meeting, in which it decided to keep interest rates unchanged, modifying its language with respect to previous statements.
He Mexican peso (MXN) expands its profits despite being on vacation in observance of the Mexican Revolution, rising more than 0.30% compared to the US dollar (USD) amid a surge in risk appetite. Overall, dollar weakness persists, despite Treasury yields advancing slightly. The USD/MXN pair is trading at 17.13 after reaching a daily high of 17.25.
Mexico’s economic agenda this week will include the release of mid-November inflation, which is expected to show a slight rebound in the headline Consumer Price Index (CPI) and a minuscule reduction in the core CPI. Additionally, the Bank of Mexico (Banxico) will publish the minutes of its last meeting after deciding to keep rates “for some time” at current levels, changing the language of the previous five meetings from “for an extended period.” Regarding rate cuts, the swap market foresees cuts of 50 basis points for the first half of 2024.
Daily Movement Summary: Mexican Peso Recovery Extends to Seven Consecutive Days, USD/MXN Hits Two-Month Lows at 17.11
- USD/MXN is trading well below the 20-, 50-, 100-, and 200-day SMAs, showing a bearish bias.
- The US Dollar Index (DXY), which measures the value of the Dollar against a basket of currencies, is posting losses of more than 0.20%, trading at 103.57, even as US Treasury yields rise.
- The yield on the 10-year US Treasury bond rises two basis points (bps), to 4.46%.
- On Friday, the figures for Mexico’s Gross Domestic Product (GDP) will be released, along with the current account for the third quarter.
- U.S. economic data on Thursday suggests the economy is slowing, as the Federal Reserve expected, after Industrial Production plunged in October and jobless claims posted the biggest increase since August.
- Data released last week showed a drop in prices paid by consumers and producers in the US, increasing investor speculation that the Fed’s tightening cycle has come to an end.
- The swaps market suggests traders expect 100 basis points of rate cuts from the Fed in 2024.
- The latest report on inflation in Mexico, published on November 9, showed that prices grew 4.26% year-on-year in October, below forecasts of 4.28% and the previous rate of 4.45%. In monthly terms, inflation stood at 0.39%, slightly above the consensus of 0.38% and 0.44% in September.
- Banxico revised its inflation forecasts from 3.50% to 3.87% for 2024, which remains above the central bank’s target of 3.00% (plus or minus 1%).
Technical Analysis: The Mexican Peso maintains the advantage, with USD/MXN targeting 17.00
The USD/MXN bearish bias remains intact, with sellers eyeing a test of 17.00, which would open the door to further losses below the figure. Next stop will be the August 28 low at 16.69, before the year-to-date low at 16.62.
On the other hand, if USD/MXN breaks above the 100-day SMA at 17.34, it could pave the way towards 17.50. However, the loss of 17.28, the November 3 low, has exposed the next demand zone at 17.00.
Frequently Asked Questions about the Mexican Peso
What key factors drive the Mexican Peso?
The Mexican peso (MXN) is the most traded currency among its Latin American peers. Its value is largely determined by the evolution of the Mexican economy, the policy of the country’s central bank, the volume of foreign investment in the country and even the levels of remittances sent by Mexicans living abroad, especially in the United States. Joined. Geopolitical trends can also move the MXN: for example, the nearshoring process – or the decision by some companies to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the currency. Mexican, since the country is considered a key manufacturing center on the American continent. Another catalyst for the MXN is Oil prices, since Mexico is a key exporter of this raw material.
How do Banxico’s decisions affect the Mexican peso?
The main objective of Mexico’s central bank, also known as Banxico, is to keep inflation at low and stable levels (at or near its target of 3%, the midpoint in a tolerance band between 2% and 4%. %). To do this, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico tries to control it by raising interest rates, which makes borrowing more expensive for households and companies, thus cooling demand and the economy in general. Higher interest rates are generally positive for the Mexican peso (MXN), as they translate into higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN.
How do economic data influence the value of the Mexican Peso?
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 Peso (MXN). A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for the MXN. Not only does it attract more foreign investment, but it may encourage the Bank of Mexico (Banxico) to raise interest rates, especially if this strength is accompanied by high inflation. However, if economic data is weak, the MXN is likely to depreciate.
How does general risk sentiment affect the Mexican Peso?
As an emerging market currency, the Mexican peso (MXN) tends to strengthen during periods of risk appetite, or when investors perceive broader market risks to be low and are therefore willing to commit to investments that carry a higher risk. On the contrary, the MXN tends to weaken in times of market turmoil or economic uncertainty, as investors tend to sell riskier assets and flee to more stable havens.
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.
