The Mexican Peso has experienced losses against the US Dollar as the USD/MXN trades at 16.68, up more than 0.30%. This decline comes after the release of the Federal Reserve meeting minutes, which suggested that officials may raise rates if inflation warrants it. This has led to a bearish sentiment towards the Peso this week, with the Peso remaining down against the Dollar.
The Federal Open Market Committee minutes emphasized the readiness of some participants to tighten policy further if necessary. There is uncertainty regarding the tightness of monetary policy, with officials stating that it may take longer than expected for inflation to reach the 2% target. This has added to the downward pressure on the Peso.
Federal Reserve officials’ comments throughout the week have indicated a generally hawkish stance, with most officials expressing a desire to see inflation decrease before considering a rate cut. The Citibanamex survey for May showed that analysts expect the Bank of Mexico (Banxico) to lower rates at the upcoming meeting on June 27. This further contributes to the Peso’s losses against the Dollar.
Mexico’s economic indicators have also played a role in the Peso’s decline, with the Economic Activity Indicator for April showing a slowdown in the economy. The upcoming announcement of Gross Domestic Product for Q1 2024 and mid-month inflation data for May will provide further insight into the state of the Mexican economy. Diverging views within Banxico regarding rate cuts have also impacted the Peso.
The technical analysis of the USD/MXN pair indicates a downtrend, with the pair breaking the 16.60 resistance level. If buyers push the pair towards the 50-day Simple Moving Average at 16.76, it could lead to further gains. Conversely, a drop below 16.52 could challenge the 16.50 psychological level, potentially leading to further losses for the Peso against the Dollar.
Overall, the Mexican Peso has faced losses against the US Dollar due to a combination of factors including the Federal Reserve’s hawkish stance, uncertainty regarding monetary policy, and economic indicators in Mexico. The upcoming Banxico meeting and economic data releases will provide further clarity on the future of the Peso-Dollar exchange rate.
