USD/MXN jumps toward 19.10 amid risk aversion

The US Dollar reversed sharply during the American session against European and commodities currencies buy it remained strong versus most Latin American currencies. The Mexican peso did not befit from the USD reversal and near the end of the day is consolidating heavy losses. 

The USD/MXN pair is trading at 2-day highs at 19.09, erasing two days of losses and back above the 20-day moving average. From a technical perspective, the critical resistance seems to be located around 19.15. A break higher could signal more gains ahead and a test of 19.30. It was yesterday when the pair approached the crucial support seen around 18.90. What has changed? 

Equity markets around the globe fell sharply weakening the demand from Latin American currencies. “Equity markets declined sharply across the board, led by the cyclical sectors, while implied market volatility bounced back. The falls across commodity prices, especially oil and industry metal commodities, underscored market concerns about the impact of the ongoing trade friction on global growth”, wrote BBVA analysts. The global growth outlook, US-China trade frictions, Brexit and weak economic data contributed to the negative sentiment on Thursday. 

The greenback turned lower during the American session against European currencies and  AUD and NZD. The Mexican Peso recovered but only momentarily. Risk aversion and a 6% decline in crude oil prices push USD/MXN to fresh highs. 

Mexico: Inflation cames slightly below expectations 

While in the US, housing data and the PMIs came in below expectations, in Mexico the half-month CPI of May showed lower-than-expected numbers. From a year ago, inflation rose by 4.43% (against expectations of a reading of 4.46%). On a monthly basis, it fell 0.3%. The core index was up 3.77% from a year ago. The CPI remains above Banxico’s target.