The Mexican Peso experienced minor losses compared to the US Dollar on Wednesday, trading at 18.41 after a slight recovery in the past five days. Political developments in Mexico, including judiciary reform, influenced market sentiment and led to flows out of the Peso. Federal Reserve officials maintained a cautious stance on inflation, affecting market expectations regarding monetary policy.
Despite a lack of significant economic data in Mexico and the United States, the USD/MXN pair saw a small uptick. Traders remained risk averse as European markets closed with losses, with the US Dollar weakening against major currencies but strengthening against emerging market currencies. Data from Mexico indicated a strong economy, with attention on upcoming reports such as April’s Retail Sales. Political uncertainty persisted after announcements by President AMLO and presumptive President Sheinbaum regarding judiciary reforms and popular election of Supreme Court ministers.
Federal Reserve officials expressed concerns about inflation and the decision on potential rate cuts. Though a rate hike is not currently on the agenda, some officials, such as St. Louis Fed President Musalem, suggested a rate increase if inflation remains stagnant. The USD/MXN exchange rate is expected to continue being influenced by political uncertainty stemming from potential reforms that could impact the rule of law in Mexico.
Key events such as the expected decrease in Mexican Retail Sales, potential actions by Banxico following recent currency exchange rate volatility, and upcoming Fed decisions could impact the USD/MXN exchange rate in the near future. The Central Bank of Mexico, Banxico, plays a vital role in maintaining stability in the country’s currency and setting monetary policy to control inflation levels. Interest rate decisions by Banxico, closely linked to those of the US Federal Reserve, can impact the Mexican Peso and attract or deter foreign investments in the country.
Technical analysis indicates a bullish trend for USD/MXN, with buyers in control and potential for a retest of the year-to-date high of 18.99. A breach of key resistance levels could lead to further gains for the pair, while a drop below support levels may keep it within a particular range. Banxico’s decision-making, influenced by the Federal Reserve’s actions, holds significant weight in determining market reactions and the future direction of the USD/MXN exchange rate.
