- Banxico’s decision to reduce its currency hedging program pushes the pair higher.
- US Non-Farm Payrolls beat expectations, but the rise in the Unemployment Rate slows the recovery of the Dollar.
- Cleveland Fed President Loretta Mester remains a hardliner on US interest rates.
He Mexican Peso (MXN) extended its losses by more than 0.50% against the US dollar (USD) after the Bank of Mexico (Banxico) decided to cut its hedging program due to the stabilization of the USD/MXN exchange rate amid geopolitical uncertainty and Covid-19. Therefore, the pair is trading at 17.1792 after hitting a daily low of 17.0430.
Mexican Peso weakens further after Banco de México’s decision to cut hedges, despite mixed US jobs numbers.
News last week that Banco de México would reduce its currency hedging program sent the USD/MXN pair plummeting as the program was designed to control volatility and was viewed by traders as an exit signal from their long positions. On August 31, the USD/MXN pair rose more than 1.70% after Banxico’s decision.
On Friday, the latest US employment numbers revealed that Non-Farm Payrolls (NFPs) rose to 187,000 in August, up from 170,000 expected and 157,000 previously (revised). However, the rise in the unemployment rate to 3.8%, versus 3.5% expected by the market and previous readings, held back the dollar’s rally, as the data was seen as justification for the Fed to hold rates unchanged. interest rates at the September meeting.
Other data The US ISM manufacturing PMI also impressed dollar buyers with a reading of 47.6 vs. analysts’ estimate of 47.0 vs. 46.4 previous readings.
Regarding the performance of central banks, the president of the Cleveland Fed, Loretta Mester, stated that the unemployment rate remains low and that he continues to see the labor market as quite strong. However, the policy maker remains hawkish and she believes rates will stay higher for longer.
On the Mexican front, the governor of Banxico, Victoria RodrÃguez Ceja, detached herself from the rate cut table, as she added: “Future prospects remain complex and uncertain. It is important to remember that periods of disinflation are not linear. “
Mexican inflation figures for August will be released soon, and the US Non-Manufacturing ISM PMI will give direction to the USD/MXN pair. However, further weakness of the Mexican peso is expected after Banxico’s coverage cuts.
USD/MXN Price Analysis: Technical Perspective
USD/MXN is consolidating, with the pair unable to hit new year-to-date lows as it reverses course, threatening to rally if it recaptures a bearish multi-month resistance trend line and 50-day SMA ( DMA) around 17.20/17.2900. If that area recovers, buyers will test the May 17 daily low, which has become resistance, at 17.4038, which is seen as a crucial level to break before testing the confluence of the 200 DMA and the psychological figure of 18,0000. To the downside, risks emerge below the 20’s and 50’s DMA confluence around 16.98/96.
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.
