- The Mexican Peso falls as market sentiment sours following Iran’s attack on Israel.
- Traders await opening remarks from President-Elect Claudia Sheinbaum.
- Stronger-than-expected US JOLTS data and comments from Powell support a bullish bias in USD/MXN.
The Mexican Peso loses ground against the US Dollar on Tuesday, as the Mexican Congress begins its General Session ahead of the swearing-in ceremony for President-Elect Claudia Sheinbaum. The exotic pair advances after Middle East headlines suggesting an Iranian missile attack on Israel. USD/MXN is trading at 19.70, up 0.15%.
Wall Street reflects bearish market sentiment due to rising geopolitical risks. This caused flows into the Dollar due to its safe haven status, which was detrimental to the Peso’s emerging market status.
Mexico’s economic agenda remains absent, with traders awaiting comments from President Claudia Sheinbaum upon taking office. Across the border, the US calendar included the release of the August JOLTS report, which was better than expected and surpassed July’s figure.
The Institute for Supply Management (ISM) revealed the September manufacturing PMI, which remained in contraction territory but unchanged compared to August.
On Monday, Federal Reserve (Fed) Chairman Jerome Powell revealed that the central bank is in no rush to reduce borrowing costs as it anticipates a 50 basis point reduction by the end of 2024.
Given the context, USD/MXN is expected to maintain a bullish bias after Powell resisted expectations of aggressive easing by the Fed.
Daily market summary: Mexican peso falls due to geopolitical risks
- Political turmoil in Mexico calms as market participants prepare for the change of president on October 1, a holiday in Mexico.
- According to swap markets, Banxico is expected to reduce borrowing costs by 175 basis points by the end of 2025.
- The US Department of Labor revealed that the August Job Openings and Labor Turnover Survey (JOLTS) increased from 7.711 million to 8.04 million, exceeding estimates of 7.655 million.
- The ISM Manufacturing PMI in September rose to 47.2, unchanged from the previous reading, but missed estimates of 47.5.
- Last week, Atlanta Fed President Raphael Bostic said he will closely monitor employment data to evaluate the Fed’s policy stance. He indicated he is open to cutting rates by 50 basis points (bps). while acknowledging that he is not yet ready to declare victory over inflation.
- Market participants have put the odds of a 25 bps cut at 61.6%. According to the CME FedWatch tool, the odds of a cut greater than 50 bps decreased to 38.4%.
USD/MXN Technical Analysis: Mexican Peso Falls as USD/MXN Rises Above 19.75
The USD/MXN uptrend remains intact and resumed for the fifth day in a row, with buyers gaining momentum. The Relative Strength Index (RSI) shows that the bulls are in charge. This means that the exotic pair could test higher prices in the near term.
If USD/MXN breaks the psychological figure of 20.00, the next resistance would be the yearly peak of 20.22. Further strength will expose the September 28, 2022 high of 20.57, followed by the 21.00 mark.
Conversely, if USD/MXN falls below 19.50, the next support would be the September 24 low of 19.23 before the pair moves towards the September 18 low of 19.06. Once these levels are surpassed, the figure of 19.00 emerges as the next line of defense.
The Mexican Peso FAQs
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.
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.
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.
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.
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.
