The Mexican Peso (MXN) has been trading mostly flat in its key pairs on Wednesday after experiencing a sudden depreciation on Tuesday, possibly due to a shift in global interest-rate expectations. This change in outlook may narrow the advantage the Peso has had due to Mexico’s relatively high interest rates, which are attractive to carry traders. Traders are now awaiting a slew of economic data about the Mexican economy to be released on Thursday, which could provide more insights into the health of the nation’s economy.
At the moment, USD/MXN is trading at 16.60, EUR/MXN at 18.04, and GBP/MXN at 21.18. The sudden depreciation of the Mexican Peso on Tuesday may have been influenced by commentary from policymakers at major central banks expressing a reluctance to lower interest rates. Federal Reserve speakers in the US have emphasized the need to keep rates at their current level until inflation returns to its 2% objective. With the release of the Federal Open Market Committee (FOMC) Minutes for the May policy meeting on Wednesday, traders are looking for new clues about the Fed’s interest rate outlook.
In Australia, the Reserve Bank of Australia (RBA) has discussed the possibility of raising interest rates to combat inflation, while the Reserve Bank of New Zealand (RBNZ) took a hawkish stance during the Asian session on Wednesday. The anticipation of higher interest rates for longer durations is strengthening these currencies, attracting more foreign capital inflows. Mexican Peso traders are preparing for a day filled with economic data releases on Thursday, including Mexican Gross Domestic Product (GDP) for Q1, 1st half-month Inflation for May, the minutes of the Bank of Mexico’s last policy meeting, and Economic Activity data for March.
Technical analysis of USD/MXN shows that the pair edged higher on Wednesday after forming a bullish reversal day on Tuesday. While Tuesday’s movement is not sufficient to confirm a trend reversal, another bullish day would increase the validity of this notion. A break above the green downtrend line is needed to confirm a reversal of the short-term trend. USD/MXN has reached the conservative target of 16.54 after breaking out of a range that formed from mid-April to early May. However, the pair remains in a downtrend, with further downside targets at 16.34 and the Tuesday low of 16.53 signaling a continuation lower.
Traders will be closely monitoring economic indicators such as the Gross Domestic Product released by INEGI on Thursday, which is a measure of the total value of goods and services produced by Mexico. A high reading is seen as positive for the Peso, while a negative trend is seen as negative. The release of this data could provide more insights into the economic health of Mexico and potentially impact the trading of the Mexican Peso.
