Mexican Peso rescued by Waller’s dovish tilt, appreciates ahead of NFP
- USD/MXN drops as Waller comments trim Fed hike bets.
- Soft claims and Yen intervention speculation pressure the Dollar.
- Banxico’s Heath signals rate cuts may remain distant.
The Mexican Peso appreciates against the US Dollar on Thursday, with the latter weakening amid a dovish tilt by Fed Governor Waller and speculation about an FX market intervention to boost the Japanese Yen. The USD/MXN trades at 16.92, down 0.32%.
USD/MXN dives amid soft US jobs data, but capped by strong PMIs in the US
Wall Street finished Thursday’s session on a positive note, as Fed Governor Waller opened the door to holding rates unchanged. He supports that decision if the disinflation process evolves, but if a red-hot US CPI report is released next week, he warned that a rate hike is possible.
Data in the US revealed that Initial Jobless Claims for the week ending August 29 ticked higher from 204K to 206K, above estimates of 205K. Other data showed that business activity in the services sector improved, with the ISM Services PMI in August coming at 5.4, up from 54.1, crushing estimates of 54.3
Digging into the details of the ISM Services PMI report, input costs rose to their highest level since May 2022, in part attributed to the energy prices. Meanwhile, the employment subcomponent remained in contractionary territory.
Banxico’s Heath: Next rate cut in about a year
In Mexico, Consumer Confidence s.a. was 46.1 in August, up from 45, but it was mostly ignored by market participants. On Wednesday, the Bank of Mexico (Banxico) Deputy Governor Jonathan Heath warned that Banxico should not cut rates in the near term, adding that a resumption of the easing cycle may be about a year away.
Heath commented, “Where we are now, it is appropriate to stop.” In Banorte’s podcast. He will support a rate cut if core inflation converges to the Mexican central bank’s 3% goal.
Ahead, the US economic docket will feature August’s Nonfarm Payrolls and Unemployment Rate update. Besides this, traders eye speeches by Cleveland Fed Beth Hammack.
USD/MXN Price Forecast: Technical outlook
In the daily chart, USD/MXN trades at 16.9254, extending its decline beneath the clustered simple moving averages (SMA) pack now grouped around 17.2648. Price holding below this triple SMA structure and under the descending trend-line framework drawn from 18.1651 and 21.0808 keeps the near-term bias bearish, even as the Relative Strength Index (14) at 33.25 hovers just above oversold territory and hints that downside momentum could be slowing rather than reversing.
On the topside, initial resistance is seen near the recent interaction with the shorter-term descending trend line around 17.0838, ahead of the triple SMA barrier at 17.2648, while a stronger cap emerges closer to the long-term trend-line proxy near 18.1200. With no clear structural floors defined in the current dataset, the pair remains vulnerable to further slippage, and only a sustained recovery above the 17.2648 SMA cluster would start to ease the bearish pressure on USD/MXN.
(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.
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