The Mexican Peso saw a strong recovery against the US Dollar and other major currencies after key US economic data was released on Wednesday. Both the US Consumer Price Index (CPI) and Retail Sales missed analysts’ expectations, leading to speculation that the Federal Reserve may cut interest rates sooner than previously thought. This news weighed on the USD but was positive for the Mexican Peso.
Following the release of the US economic data, the Mexican Peso is trading flat in most pairs on Thursday as traders take a pause after the Peso’s rally. The lower-than-expected CPI and Retail Sales data for April in the US indicated a slowdown in inflation and economic activity, causing a shift in interest rate expectations. This suggests that the Fed may be more inclined to lower borrowing costs, which is negative for the USD but positive for the Mexican Peso.
Currently, USD/MXN is trading at four-week lows of 16.71, EUR/MXN at 18.18, and GBP/MXN at 21.19. The Mexican Peso rebounded against the US Dollar and other major currencies following the release of the US data, as investors speculated on the possibility of an early interest rate cut by the Fed. Lower interest rates would negatively impact the USD as they reduce foreign capital inflows.
Technical analysis indicates that USD/MXN has resumed its short-term downtrend, with the pair moving towards the conservative target for the breakout at 16.54. Further downside could see the pair reaching 16.34, the full height of the range extrapolated lower. Given the bearish medium and long-term trends, the odds favor more downside for the pair unless there is a recovery and a decisive break above 16.86.
The US CPI data showed a drop of 0.3% on a month-on-month basis in April, below the 0.4% forecast and the March reading. Meanwhile, Retail Sales for April showed flat consumer spending, with a 0.0% reading that was well below estimates. The data led to a rise in USD/MXN as investors adjusted their expectations of future US interest rates. The CPI data is a key indicator to measure inflation and changes in purchasing trends, with a high reading seen as bullish for the USD and a low reading as bearish.
In conclusion, the Mexican Peso has seen a strong recovery against the US Dollar and other major currencies following the release of lower-than-expected US economic data. The possibility of an early interest rate cut by the Fed has weighed on the USD but has been positive for the Mexican Peso. Traders are closely watching the future course of US interest rates and the impact on the USD/MXN pair.
