- USD/MXN trades at 17.1200, down 0.53%, after US CPI for August comes slightly above the 3.6% forecast.
- CME FedWatch Tool indicates a 41% chance of a 25 bps rate hike in November, keeping traders cautious.
- Upcoming US labor and retail data and Banxico’s 11.25% TIIE could push USD/MXN to test the 17.0000 level.
The Mexican Peso (MXN) shrinks its losses and stages a comeback against the US Dollar (USD), after data from the United States (US) further cemented the case for the US Federal Reserve to hike rates at the September meeting. The USD/MXN is trading at 17.1200, down 0.53, after reaching a daily high of 17.2919.
Mexican Peso rebounds vs. the Greenback amid uncertainty over US monetary policy
US inflation exceeded estimates, as August’s Consumer Price Index (CPI) came at 3.7% YoY, while forecasts saw inflation at 3.6% above July data. Contrarily, core inflation dropped from 4.7% YoY in July to 4.3%, as projected by analysts, painting a mixed picture of inflation. Nevertheless, the data failed to price in additional tightening by the US Federal Reserve (Fed), as shown by money market futures data.
The CME FedWatch Tool still sees the Fed would keep rates at around the 5.25%-5.50% range for the upcoming September meeting, but for November, odds for a 25 bps rate hike are at 41%.
Nevertheless, USD bears are not out of the woods yet, as labor market data still shows signs of a hot jobs market. Unemployment claims for the last week are expected to rise to 225K, above the previous 216K reading. That, alongside August’s Retail Sales report, which is foreseen to come weaker than July’s numbers, could cement the case for an end of the Fed’s tightening cycle.
Additional inflation data will be revealed on Thursday, with the Producer Price Index (PPI) foreseen to continue decelerating.
If the data shows signs of an economic slowdown for the US, expect the USD/MXN to test the 17.0000 figure, as the interest rate difference between Mexico and the US favors the former, with Banxico’s TIIE at 11.25%, compared to the effective Federal Funds Rate (FFR) at 5.33%.
USD/MXN Price Analysis: Technical outlook
Even though the USD/MXN has retraced somewhat, the pair remains neutral to upward bias unless Mexican Peso buyers reclaim the August 28 daily low of 16.6924. However, it could challenge the psychological 17.00 figure, but traders must crack solid support standing in its way. Before testing the former, the 20-day Moving Average (DMA) is at 17.0902, followed by the 50-DMA at 17.0108. Conversely, a bullish continuation would resume once buyers reclaim the 100-DMA at 17.2452.
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
EUR/USD trades with a bearish bias above 1.0750 ahead of US economic data
EUR/USD trades on a softer note around 1.0770 during the Asian trading hours on Monday. Investors turn to cautious mode and prefer to wait on the sidelines ahead of the US key economic data this week.
GBP/USD hovers above 1.2500, focus on UK labor data scheduled for Tuesday
GBP/USD edges higher to near 1.2520 during the Asian session on Monday, possibly due to improved risk appetite. The Pound Sterling was bolstered by releasing higher-than-expected UK Gross Domestic Product figures on Friday.
Gold price loses its recovery momentum, eyes on Fedspeak
Gold price loses its recovery momentum on Monday during the Asian session. The hawkish remarks from the Federal Reserve and growing speculation that the Fed might delay its easing plans have boosted the Greenback and dragged the USD-denominated gold lower.
Here’s what needs to happen for The Graph price to revisit $0.422
The Graph price consolidation below a key hurdle shows that it is ready for a volatile move. With GRT retesting the upper limit of its rangebound movement, chances of an upside breakout are high.
Inflation and tariffs take center stage in discussions
This week market focus will center around inflation data from the US, the world's largest economy, poised to influence global market sentiment. Overall market sentiment appears optimistic as the potential for a US interest rate cut in September has re-entered the conversation.