- Mexican Peso capitalizes on mixed economic data from the US.
- Mexico's economic indicators show a slowdown, with housing construction down 5.2% YoY in September.
- Fed's mixed messages on future rate cuts keep markets guessing, with further US data awaited this week.
The Mexican Peso registers decent gains versus the US Dollar after mixed US economic data augmented the chances that the Federal Reserve (Fed) could lower interest rates at the December meeting. The USD/MXN trades at 20.26, down 0.20%.
Mexico’s economic docket remained absent, yet September Gross Fixed Investment figures revealed on Tuesday hinted that the economy is slowing down. Figures showed that housing construction plunged 5.2% YoY in September, posting back-to-back months of losses, the most profound fall since March 2021.
Capex in machinery and equipment witnessed a mild advance of just 0.8%, the lowest level since the post-Covid-19 recovery in March 2021.
Across the border, the US jobs market revealed solid figures. Still, business activity witnessed a dip in the services sector, according to S&P Global and the Institute for Supply Management (ISM).
In the meantime, Fed speakers crossed the newswires. St. Louis Fed President Alberto Musalem said that time might be near to slow or pause rate cuts. Musalem added that the labor market is consistent with full employment and that inflation can converge toward 2% in the next two years.
At the same time, the Richmond Fed’s Thomas Barkin said that risks on inflation and maximum employment remain balanced.
Ahead this week, Mexico’s schedule will feature the release of automobile production data. In the US, the docket will feature Fed speakers, Initial Jobless Claims and Nonfarm Payrolls (NFP) figures.
Daily digest market movers: Mexican Peso boosted by falling US Dollar
- The latest Citi Mexico survey showed that most economists estimate Banxico will cut rates by 25 basis points at the December meeting. Analysts project the economy will grow 1.5% in 2024 and 1% in 2025.
- US ADP National Employment report for November revealed that private hiring jumped by 145K, below forecasts of 150K, and beneath the downwardly revised October figures from 238K to 184K.
- The ISM Services PMI in November retreated from 56 to 52.1, below estimates of 55.7. Earlier, S&P Global Services PMI dipped from 57 to 56.1, missing forecasts of 57.
- US Durable Goods Orders improved from 0.2% to 0.3% MoM in October, according to the US.
- The CME FedWatch Tool suggests that investors see a 79% chance of a 25-basis-point (bps) rate cut at the Fed’s December meeting.
- Data from the Chicago Board of Trade, via the December fed funds rate futures contract, shows investors estimate 19 bps of Fed easing by the end of 2024.
- Banxico’s November survey shows that analysts estimate inflation at 4.42% in 2024 and 3.84% in 2025. Underlying inflation figures will remain at 3.69% in 2024 and 2025. GDP is forecasted at 1.55% and 1.23% for 2024 and 2025, respectively, and the USD/MXN exchange rate at 20.22 for the rest of the year and 20.71 in 2025.
Mexican Peso technical outlook: USD/MXN drops below 20.30 on Peso’s strength
The USD/MXN uptrend remains intact, although the exotic pair fell below 20.50. Momentum shows that bears are in charge, as depicted by the Relative Strength Index (RSI) aiming toward its neutral line.
If USD/MXN drops below the November 19 low of 20.06, the next stop would be 20.00. On further weakness, the exotic pair will test the 50-day Simple Moving Average (SMA) at 19.97. A breach of the latter will expose the 100-day SMA at 19.61 before the psychological 19.00 figure.
On the other hand, if USD/MXN reclaims 20.50, the next resistance would be the year-to-date peak at 20.82. If surpassed, the next stop would be 21.00, ahead of the March 8, 2022 peak at 21.46, followed by the November 26, 2021 high at 22.15.
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD consolidates near two-week high, looks to US NFP for fresh impetus
AUD/USD holds steady around the 0.6335 area during the Asian session on Friday as traders now await the US NFP report. Bets that the Fed will cut rates further amid concerns over failing US economic growth keep the USD depressed near a multi-month low and act as a tailwind for spot prices, though tariff jitters warrant caution for bulls.
USD/JPY seems vulnerable amid divergent Fed-BoJ expectations; US NFP awaited
USD/JPY languishes near its lowest level since October touched on Thursday amid a bearish USD, led by bets that the Fed could cut rates multiple times in 2025 amid slowing US economic growth. Moreover, the hawkish sentiment surrounding the BoJ's policy outlook underpins the JPY and validates the negative bias for the pair.
Gold price remains depressed ahead of US NFP; trade jitters to limit losses
Gold price trades with negative bias for the second straight day, though a combination of factors continues to act as a tailwind ahead of the crucial US NFP report later this Friday. Rising trade tensions continue to weigh on investors' sentiment.
Crypto AI Tokens: Why FET, NEAR and RNDR could outperform BTC after White House Summit
The White House Crypto Summit is scheduled to hold on Friday. Rather than double-down on BTC, sector-wide price trends show that investors are leaning towards Crypto AI altcoins.
Make Europe great again? Germany’s fiscal shift is redefining the European investment playbook
For years, Europe has been synonymous with slow growth, fiscal austerity, and an overreliance on monetary policy to keep its economic engine running. But a major shift is now underway. Germany, long the poster child of fiscal discipline, is cracking open the purse strings, and the ripple effects could be huge.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.