- The Mexican peso is stabilized against the US dollar before the publication of the US CPI on Wednesday, which could guide Fed expectations.
- The US and Mexico are preparing for commercial conversations, scheduled to be held in Canada on Wednesday.
- The USD/MXN pauses above 19.00 while commercial conversations between the US and China limit the gains of the torque.
The Mexican peso (MXN) is negable against the US dollar (USD) during the American session on Tuesday, since the investor approach remained in the business conversations in progress between the US and China in London.
A recent increase in appetite for risk, driven by negotiations encouraging signals, has helped stabilize the US dollar, keeping USD/MXN confined in a narrow range around 19.05.
The US consumer price index and commercial conversations between the US and Mexico take prominence
On Wednesday, the United States will publish the May Consumer Price Index (CPI), which is expected to report expectations for the Federal Reserve (FED). In addition, Mexican president Claudia Sheinbaum will meet with the Undersecretary of State for the US, Christopher Landau, in Canada. These conversations are scheduled to be held in Canada, where both nations will attend the summit of the seven group (G7).
Conversations are expected to address bilateral tensions and relations between the US and Mexico, which have been under pressure due to tariffs imposed on Mexican imports to the US.
The tensions between the US and Mexico have intensified after the US increased its tariff rate on 50% steel and aluminum imports from 25% last week. Mexico requested an exemption against these tariffs on Friday and has threatened to announce retaliation tariffs if progress is not achieved in conversations this week.
Daily summary of the Mexican weight: USD/MXN remains focused on interest rates and commercial relations
- Mexico will publish its industrial production data at 2:00 p.m. GMT on Wednesday. The Mayo report showed that industrial production contracted an intermencing 0.9% in March.
- The US Consumer Price Index (CPI) for May will be published at 14:30 GMT on Wednesday.
- It is projected that inflation general increases to 0.3% intermennsual in May, compared to 0.2% in April, with the annual rate rising to 2.5% from 2.3%.
- The underlying IPC, which excludes food and energy prices, is also expected to increase 0.3% intermensual, compared to the previous 0.2%, with annual reading by increasing 2.9% from 2.8%.
- These data are highly significant, since they will play an important role in the formation of market expectations around the Fed Rate Road.
- According to the CME Fedwatch tool, market participants expect the FED to maintain interest rates without changes within the current range of 4.25% to 4.50% in June and July meetings, with a 53.6% probability of a rate cut already incorporated for September.
- The conversations in London between senior US officials and China have shown signals encouraging, helping to raise the feeling of risk and stabilize the US dollar.
- On Tuesday, US Treasury Secretary, Scott Besent, US trade representative, Jamieson Greer, and Commerce Secretary, Howard Lutnick, continued their discussions with the Vice Prime Minister of China, He Lifeng, in London for the second day.
- The US Non -Agricultural Payroll (NFP) report on Friday surprised upwards, with May labor data showing 139,000 new added jobs, exceeding the expectations of analysts of an increase of 130,000.
- This stronger figure than expected reinforced the resilience of the US economy and helped raise the US dollar.
Technical analysis of the Mexican weight: USD/MXN stops above 19.00
The USD/MXN negotiates about 19.05 on Tuesday, staying just above the key level of fibonacci setback of 61.8% in 19.01, drawn from the minimum of July to the maximum of February.
This area has provided a strong technical support in recent sessions, helping to stabilize the torque after a sustained pressure.
USD/MXN daily graphics
Immediate resistance is observed between 19.21 and 19.28, where simple mobile socks (SMA) of 10 and 20 days are limiting rising attempts.
A movement confirmed above this range could open the door to the 19.47–19.74 area, where broader backward levels of the November 2021 movement to April 2024 are providing additional technical barriers.
Downward, a break below 19.01 would be significant and could trigger a deeper setback by 18.85 and possibly 18.60.
Meanwhile, the relative force index (RSI) is about 34, suggesting that the bassist impulse is slowing down but has not yet been reversed. The next directional movement will probably be promoted by key macro events, including the US CPI report on Wednesday and developments in global commercial relations.
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.
