USD/MXN rises as investors prepare for Fed decision

• USD/MXN is trading at 17.1182, bouncing from a daily low of 17.296, as markets anticipate key central bank decisions this week.
• The US Federal Reserve is expected to keep rates steady, but last week’s spike in inflation keeps options open; traders are waiting for the update of “dot charts”.
• Mexico’s private consumption slows to 4.3% year-on-year in the second quarter of 2023, while upcoming data could show a decline in retail sales and a slowdown in inflation.

He Mexican peso (MXN) loses ground against the Dollar on Monday, ahead of a busy week in the central bank space, as three of the largest are set to deliver their decisions. At the time of writing these lines, the pair USD/MXN It is trading at 17.1182, after registering a daily low of 17.0296.

The Mexican Peso weakens against the Dollar on the eve of a crucial week for Central Banks, with attention focused on the Fed’s “dot plots” and inflation data

Investor sentiment depreciated the Mexican currency, as the United States Federal Reserve (Fed) is expected to issue its decision on Wednesday, around 18:00 GMT, followed by Jerome Powell’s press conference. According to data, the swaps market sees the Fed keeping rates unchanged, at 5.25%-5.50%, it is believed that it would keep its options open due to the spike in inflation last week. USD/MXN traders would be attentive to the update of the so-called “dot chart”.

The US economy witnessed a slight rebound in consumer and producer price indices. With fewer Americans filing for unemployment benefits, the labor market remains buoyant. This was reflected in retail sales, which grew at a slower rate, while consumer sentiment deteriorated, attributed to high gasoline prices. Inflation expectations in particular came under downward pressure, the University of Michigan revealed.

On the Mexican front, private consumption in Mexico grew 4.3% year-on-year in the second quarter of 2023, down from the previous reading of 4.8%, according to figures revealed by the National Institute of Statistics, Geography and Informatics (INEGI).

Investor sentiment improved as Chinese data attested that the economy has bottomed out following the government’s efforts to stimulate the economy, which failed to recover as most financial market analysts expected.

Data on housing, the Fed’s decision, employment data and S&P Global PMIs will be published on the US economic agenda. In Mexico, a deterioration in retail sales is expected, while a slowdown in inflation is expected in the first half of September.

USD/MXN Price Analysis: Technical Outlook

The pair found a foothold around 17.0297 before testing the 50-DMA, which has risen above the 20-DMA at 17.0992, exacerbating a test of the 100-DMA at 17.2188. . A break of the latter would expose the 17.50 zone, followed by the September 7 high at 17.7074, before challenging the psychological level of 18.0000. On the contrary, if the pair declines towards the 20-DMA, it could pave the way for a crack below 17.0000. The next support will be the daily low of August 28 at 16.6923.