The Mexican Peso has been under pressure due to inflation still being above the Banxico’s goal of 2-4%, despite recent declines in inflation rates. Economic data also shows a deceleration in Mexico’s GDP, hinting at a potential for further rate adjustments by the central bank. Meanwhile, the US Dollar has been strengthening against most currencies due to strong labor market data and Fed officials signaling potential rate cuts in September.
The USD/MXN pair traded at 19.42, gaining 0.81% as the Mexican Peso extended its losses against the US Dollar. While inflation is decreasing, it remains above Banxico’s goal, prompting speculation of another rate adjustment by the central bank. The US Dollar appreciated against most currencies amid mixed economic data, contributing to the Peso’s decline against the Greenback.
While economic data showed a deceleration in Mexico’s GDP for the second quarter of 2024, it remains above the 2% threshold. Banxico’s latest meeting minutes revealed a split decision to lower rates to 10.75%. While inflation outlook calls for a restrictive monetary policy, significant progress on inflation suggests a reduction in the level of monetary restriction, leading to a rate cut.
Federal Reserve officials have signaled potential rate cuts in September, citing strong labor market data. Banxico will release its August meeting minutes, which could provide further insight into future policy decisions. The Mexican Peso remains under pressure as economic data indicates tepid growth, contributing to its depreciation against the USD.
Technical analysis shows that the USD/MXN pair is facing resistance around 19.50, with potential for further upside if this level is breached. Conversely, a drop below 19.00 could lead to a decline in the exchange rate towards the 50-day Simple Moving Average at 18.48. The outcome of Banxico’s meeting minutes and Federal Reserve decisions will likely impact the future direction of the Peso against the US Dollar.
Banxico, Mexico’s central bank, plays a crucial role in preserving the value of the Mexican Peso and setting monetary policy. Their main objective is to maintain low and stable inflation within target levels of 2-4%. Interest rates are a key tool used by Banxico to guide monetary policy, with decisions influenced by the US Federal Reserve. Banxico meets eight times a year, with decisions often reacting or anticipating Fed policy measures. The central bank’s decisions have a significant impact on the Mexican Peso’s value in the forex market.
