- Dollar weakness pressures USD/MXN lower on Thursday.
- Volatility remains high in the pair.
- Banxico cuts growth projection and raises inflation.
The USD/MXN trades on Thursday after starting the American session at a two-day low at 19.54, after having traded above 19.70 hours ago. The dollar is retreating on all fronts as commodities rise and equity markets fall.
The decline of the pair has an explanation in the weakness of the dollar and the rise in commodities. Equity markets are down, with the Dow Jones down 0.75% and the Nasdaq down 0.15%. The cautious mood on the stock market is generally negative for emerging market currencies.
Treasury bond yields are starting to rise, which may favor a rebound of the USD/MXN from the 19.50 zone. Bonds were not affected by the ADP employment report, which showed lower than expected figures. On Friday it will be the turn of the official employment report with non-farm payrolls.
The Bank of Mexico published a report on Wednesday in which it cut the growth projection to 2.2% for this year, and to 2.4% for 2023 (previously at 2.9%). The quarterly inflation report. Regarding inflation, they see it remaining above 7% for at least the third quarter and dropping to 6.4% in the fourth.
Looking at 19.50 and 19.70
USD/MXN could challenge 19.50 again; a confirmation below will leave the Mexican peso strengthened. In the opposite direction, the 19.70/75 zone is the resistance to watch. This area is expected to continue to slow down the rises. A consolidation at higher levels would leave the dollar ready to go higher.
Technical levels
Source: Fx Street
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