- USD/MXN remains depressed, down 3.54% for the week due to the strength of the Mexican peso.
- The increase in US jobless claims reinforces the idea of a pause from the Federal Reserve as the job market cools.
- The Bank of Mexico is expected to raise rates by 25 basis points, and then a pause is expected.
In the North American session, the pair USD/MXN it remains practically sideways on Thursday, after the Mexican peso (MXN) failed to break above the 18.00 zone. However, the Mexican currency registers gains against the US dollar (USD) of 3.54% amid investor optimism that the US Federal Reserve will end its tightening cycle. He USD/MXN trades at 18.0860.
The USD/MXN pair remains almost sideways, with traders waiting for Banxico’s move
Sentiment is bullish on Wall Street, which is trading higher. The dollar continues to weaken to new weekly lows, as the Dollar Index shows (DXY)but MXN bulls remain on the sidelines, awaiting Banxico’s decision.
US data, among other reasons, is keeping the dollar under pressure. Initial claims for unemployment benefits for the week ending March 25 rose by 198,000, above the 196,000 expected, the Department of Labor (DoL) reported. Meanwhile, the US Department of Commerce released the final reading of Gross Domestic Product (GDP) for the fourth quarter of 2022, which fell slightly below the 2.7% estimate to 2.6%.
The rise in US jobless claims is more than welcome by the Federal Reserve as it fights to curb high inflation. If the labor market continues that trend, that will help bring inflation down. However, it is premature to claim victory as the Fed’s preferred inflation gauge will be released on Friday. Basic Personal Consumption Expenditure (PCE) is estimated to be 4.7% year-on-year.
On the Mexican front, most analysts expect Banxico’s last interest rate hike of its 25 bp tightening cycle, which would leave the TIIE at 11.25%. TD Securities Senior Latam Strategist Joel Virgen Rojano wrote in a note: “We expect Banxico to rise 25 bp on March 30 and leave the terminal at 11.25%. We believe the bar is high for the central bank to come back to contradict his own future guidance”.
Regarding the future of the Mexican peso after Banxico’s decision, Virgen Rojano added: “We do not expect a significant reaction from the MXN to Banxico’s decision, as we believe it has been discounted for the most part. However, we do expect a gradual weakening of the MXN against the USD in the coming months”.
USD/MXN Technical Levels
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.
