The Mexican Peso regained some ground against the US Dollar, trading at 16.64, down 0.09% amid thin volume conditions on Monday as Wall Street was closed for Memorial Day. The Mexican economic docket for the week is light, with traders anticipating the release of the core Personal Consumption Expenditures Price Index (PCE) on Friday. Softer results on the PCE could increase the prospects for a rate cut in 2024.
The USD/MXN trades at 16.64, with positive market sentiment in Europe, although volume conditions remain tight due to the American holiday. Mexico’s National Statistics Agency reported a trade deficit in April after a surplus in March, while the Bank of Mexico recorded a Q1 2024 Current Account deficit. Across the border, the US economy remains strong, but uncertainty lingers after a worse-than-expected Durable Goods Orders report on Friday.
Mexico’s economic outlook is becoming uncertain, with rising headline inflation in May and a slowdown in economic growth. A widening trade deficit could also add pressure on the Mexican Peso. The Citibanamex poll predicts a rate cut by Banxico in June, with economists estimating headline and core inflation rates for 2024. The US economic docket for the week includes key data releases and the release of core PCE.
Technical analysis shows the USD/MXN downtrend continuing as buyers failed to overcome key levels. The RSI is pointing downwards, indicating bearish momentum. The path of least resistance is downward, with support levels at 16.62, 16.52, and 16.25, while resistance levels lie at 16.70, 16.89, 17.00, and 17.14.
The Mexican Peso’s value is influenced by various factors, including the country’s economy, central bank policy, foreign investment, remittances, and geopolitical trends. Banxico aims to maintain low and stable inflation through interest rate adjustments, which can affect the strength of the Peso. Macroeconomic data releases play a crucial role in determining the state of the economy and can impact the Peso’s valuation. As an emerging-market currency, the Mexican Peso performs well during risk-on periods and weakens during times of market turbulence or uncertainty.