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Mexican Peso edges lower as solid US jobs boost the USD

  • USD/MXN edges higher as solid jobless claims support the US Dollar.
  • Fed hawks keep tightening risks alive before Warsh speech.
  • Hawkish Warsh tilt could push pair back above 17.00.

The Mexican Peso (MXN) loses ground modestly against the US Dollar (USD) on Thursday after economic data in the United States showed that the jobs market is solid, while inflation remains above the Federal Reserve’s (Fed) 2% goal. This suggests that higher interest rates are warranted, a tailwind for the Greenback. The USD/MXN pair trades near 16.97, up 0.09%.

USD/MXN rises modestly as traders await Warsh’s Jackson Hole speech

Price action shows that the Mexican currency has failed to gain traction over the last four trading days, perhaps awaiting Fed Chair Kevin Warsh's speech at Jackson Hole on Friday. In the meantime, solid economic data frm the United States (US) keeps the USD/MXN within familiar levels.

US data showed that jobless claims for the week ending August 22 were below estimates of 208K, coming in at 203K. This reaffirms the strength of the labor market, while the US trade deficit widened, according to the US.

Despite this, the US Dollar remained contained, as reflected in the US Dollar Index (DXY). The DXY, which measures the buck’s value versus six currencies, is flat at 99.14.

Market participants' focus is on what Fed Chair Kevin Warsh will say on Friday at Jackson Hole. Some of his colleagues spoke with the media, reaffirming their monetary policy stance,

Boston Fed Susan Collins commented that the recent PCE data did not change the overall outlook that the current monetary policy stance is restrictive, but recognised that a rate hike is “warranted if inflation disappoints,” via the WSJ.

Earlier, Cleveland Fed's Beth Hammack was hawkish, saying the job market is broadly in balance and adding that “now is the time to act” on tightening monetary policy.

Ahead of the Mexican economic docket, the US will see the release of the University of Michigan's Consumer Sentiment and Warsh's speech.

Given the backdrop, a hawkish tilt by Warsh can drive USD/MXN back above 17.00, paving the way for further gains. On the flip side, the pair can retest yearly lows below 16.90.

USD/MXN Price Forecast: Technical outlook 

Chart Analysis USD/MXN
USD/MXN daily chart

In the daily chart, USD/MXN trades at 16.9782, extending a bearish near-term tone as spot remains capped beneath the triple simple moving average cluster (50, 100 and 200-day SMA) at 17.3142 and the descending resistance trend line coming from 18.1651, which now projects around 17.3487. The latest 14-day Relative Strength Index at 34.55 hovers just above oversold territory, hinting that downside momentum is still dominant but could be losing some intensity as the pair consolidates below the aforementioned moving averages.

On the downside, the key structural floor emerges at the long-term trend-line break level near 15.47, which marks the next major support if selling resumes. On the topside, initial resistance is aligned at the triple SMA around 17.31, followed closely by the descending trend-line barrier at 17.35; only a sustained recovery above this resistance zone would ease the current bearish bias and open the way for a more meaningful rebound.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

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.

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

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