- USD recovery loses momentum as risk aversion eases.
- Hopes for a dovish turn by the Federal Reserve are adding negative pressure to the Dollar
- The USD/MXN uptrend remains intact, with downside attempts contained above 18.60.
The US dollar is virtually flat on the daily chart, consolidating gains after a five-day rally. The bulls found resistance at the 18.75 area on Monday and the pair has remained trading sideways on Tuesday, with downside attempts limited above 18.60 so far.
A somewhat more optimistic market sentiment is weighing on the safe-haven US Dollar and hopes for some dovish signals following the Fed meeting are adding pressure on the USD.
Recent US data has fueled hopes of a September cut
The US labor market is showing signs of exhaustion, with unemployment rising in June and inflation finally approaching the 2% level. Data released last week revealed that the PCE Price Index remained unchanged at an annual rate of 2.5% in June.
These figures have raised expectations that the Bank could begin cutting rates in September, rather than December as the Fed’s previous projections suggested.
Against this backdrop, the Fed’s monetary policy decision on Wednesday will be closely watched. The bank is very likely to leave rates unchanged, but any signals towards earlier rate cuts will likely weigh on the USD.
USD/MXN consolidates with bullish trend intact
From a technical perspective, the pair is consolidating gains ahead of the meeting. The overall bias remains bullish, with resistances at 18.80 and 19.00. Supports are 18.60 and 18.30.
Mexican Peso FAQs
The Mexican Peso is the legal currency of Mexico. The MXN is the most traded currency in Latin America and the third most traded currency in the Americas. 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 primary 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 banking sector, and provides economic and financial advice to the government. Banxico uses the tools and techniques of monetary policy to achieve 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, which affects their ability to invest and save. In general, inflation affects the Mexican economy because Mexico imports a significant amount of final consumer 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, potentially affecting 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, potentially affecting 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.
