Mexican Peso nears the key 20.00 level against US Dollar ahead of claims, PPI
- The Mexican peso trades practically flat against the US Dollar near the 20.00 level.
- Hopes of Fed interest-rate cuts next week are acting as a headwind for the US Dollar.
- Technically, the USD/MXN pair remains bearish, with upside attempts limited at 20.30.
The Mexican Peso (MXN) trades practically flat against the US Dollar (USD) on Thursday, with the key 20.00 support area holding the Greenback ahead of the US Producer Price Index (PPI) and Weekly Jobless Claims data. The Peso picked up on Wednesday after the US Consumer Prices Index (CPI) figures cemented hopes of a Federal Rerserve’s (Fed) rate cut next week.
The USD is drawing some support from higher US Treasury yields, which have rallied for the last three days with investors paring back hopes of monetary easing for 2025. The strong US macroeconomic data and the outlook of higher inflationary pressures from Donald Trump’s policies are likely to limit the US central bank’s leeway to lower borrowing costs.
In Mexico, softer-than-expected Consumer Prices Index data, coupled with a deteriorated Consumer Confidence index, has bolstered the case for a 25 bps cut by the Bank of Mexico next week.
Daily digest market movers: Weak Mexican data likely to weigh on MXN
- Mexico’s Industrial Production is expected to have contracted by 0.2% in November compared with the previous month after increasing by 0.6% in October. Year-on-year, output is expected to decline by 0.6% from the 0.4% drop in October.
- Later today, the US PPI is expected to have grown at a steady 0.2% pace in November and by 2.6% year-on-year, up from 2.4% in October. The core PPI is seen easing to 0.2% from 0.3% in the previous month with the yearly rate accelerating to 3.2% from 3.1%.
- US Initial Jobless Claims are seen declining to 220K in the first week of December from 224K in the previous week.
- On Wednesday, US Consumer Price Index (CPI) figures revealed that inflation accelerated to 0.3% in November and to 2.7% on the year as expected, posting its largest increase in seven months.
- Futures markets, however, are now nearly fully pricing a 25 bps cut by the Fed next week. The CME Fed Watch tool shows a 98% chance of such a scenario, up from 85% earlier this week.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Swiss Franc.
USD EUR GBP JPY CAD AUD NZD CHF USD -0.04% 0.02% -0.18% -0.13% -0.53% -0.23% 0.27% EUR 0.04% 0.06% -0.14% -0.09% -0.49% -0.19% 0.30% GBP -0.02% -0.06% -0.19% -0.15% -0.55% -0.25% 0.24% JPY 0.18% 0.14% 0.19% 0.03% -0.35% -0.08% 0.44% CAD 0.13% 0.09% 0.15% -0.03% -0.39% -0.09% 0.40% AUD 0.53% 0.49% 0.55% 0.35% 0.39% 0.30% 0.79% NZD 0.23% 0.19% 0.25% 0.08% 0.09% -0.30% 0.49% CHF -0.27% -0.30% -0.24% -0.44% -0.40% -0.79% -0.49% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Mexican Peso technical outlook: USD/MXN remains supported above 20.00 key level
The USD/MXN pair remains steady above the 20.00 support area, with the December 5 high at the 20.30 area capping upside attempts. The pair is trading practically flat, awaiting US data.
The short-term bias remains bearish as a double top at 20.80 suggests the possibility of a deeper correction. The 20.00 psychological level is a key support. Below here the target is November’s low at 19.75.
On the upside, the December 5 high at 20.30 is holding upside attempts ahead of the December 2 high at 20.60 and November’s peak at around 20.80.
USD/MXN 4-Hour Chart
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
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