The Mexican Peso showed strength against the US Dollar after the inauguration of President Claudia Sheinbaum, with USD/MXN dropping by 0.37% and trading at 19.60. She reassured investors that their investments were secure, leading to a bullish bias in the Peso. However, Wall Street reflected a downbeat mood due to geopolitical risks, causing flows towards the Greenback as a safe-haven asset, which negatively affected the Peso’s status as an emerging market currency.
With Mexico’s economic calendar empty, traders were anticipating Sheinbaum’s remarks as she took office. Meanwhile, the US released positive data, including the August JOLTS report and the September Manufacturing PMI remaining unchanged from August. Federal Reserve Chair Jerome Powell also mentioned that the central bank is not in a rush to lower borrowing costs, with expectations of easing by 50 basis points by the end of 2024.
The Mexican Peso advanced despite geopolitical risks as the country prepared for the change of president on October 1. Swaps markets indicated that Banxico is expected to lower borrowing costs by 175 basis points by the end of 2025. The US Department of Labor reported an increase in the August JOLTS, exceeding estimates, while the ISM Manufacturing PMI missed expectations. Market participants are closely monitoring the Fed’s policy stance, with the likelihood of a rate cut diminishing.
In terms of technical analysis, the USD/MXN uptrend continued with buyers gaining momentum, indicating a potential test of higher prices. Resistance levels include the YTD peak of 20.22 and the September 28, 2022, high of 20.57. On the other hand, support levels are at 19.50, followed by the September 24 swing low of 19.23 and the September 18 low of 19.06.
The Mexican Peso’s value is influenced by various factors such as the performance of the Mexican economy, investment levels, remittances from abroad, geopolitical trends, and oil prices. Banxico’s objective is to maintain inflation at low and stable levels by setting appropriate interest rates. Strong macroeconomic data is favorable for the Peso, attracting foreign investment and potentially leading to interest rate hikes. As an emerging market currency, MXN tends to perform well during risk-on periods but may weaken during market turbulence or economic uncertainty.
In conclusion, the Mexican Peso has shown strength against the US Dollar following Sheinbaum’s inauguration, with positive economic data and Banxico’s monetary policy expectations influencing its performance. Traders are closely monitoring geopolitical risks and market sentiment, with technical analysis pointing towards a continuation of the upward trend for the USD/MXN pair. Overall, the outlook for the Mexican Peso remains positive, supported by favorable factors in the domestic and global economic landscape.
