USD/MXN near monthly highs as Mexican peso remains under pressure
|- Mexican peso consolidates losses across the board, await more negotiations.
- US Dollar mixed across the board ahead of Friday’s NFP.
The Mexican peso tumbled late yesterday following two downgrades to Mexico’s debt rating and also after initial talks in Washington failed to reach an agreement. Today the Peso recovered modestly, and it is consolidating most of the losses.
The USD/MXN jumped from 19.50 to 19.83, approaching the multi-month high it hit on Monday at 19.88. Today pulled back, and it has been hovering around 19.70 over the last hour showing some consolidation after dramatic moves.
Three strikes
Fitch downgraded Mexico’s debt rating to BBB from BBB+ while Moody’s changed its outlook to negative from stable. The economic outlook, Pemex finances, and the way the government is handling its policies were the arguments for the downgrades.
The Mexican economy contracted during the first quarter. Today Mexican President Andrés Manuel López Obrador, showed confidence for achieving a 2% growth during 2019 but the current outlook does not look positive.
Trump’s tariffs announcement created more concerns and pushed the Mexican peso to the downside. When the currency was recovering, it received yesterday’s double downgrade and came again under pressure.
The USD/MXN is expected to remain supported by concerns about the economic outlook in Mexico. If a deal is reached with the US, it could recover but the area around 19.00, where it traded a week ago, seems out of reach for the moment. On the flip side, a test of 20.00 looks likely, particularly if Mexican and US officials do not reach an agreement soon. From a technical perspective, a consolidation on top of 19.80 would expose the 19.95/20.00 barrier.
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