Mexican Peso pushes into familiar highs on Thursday as risk appetite rebounds

Mexican Peso propped up by recovering market sentiment.
Mexico Trade Balance due Friday to be overshadowed by US PCE Price Index inflation.
Surprise drop in US inflation indicators pins risk appetite despite overall mixed bag.

The Mexican Peso (MXN) is on the rebound for Thursday, gaining ground against the US Dollar (USD) as broader markets sell off the Greenback despite mixed results from the day’s slew of US data points.

Economic data from Mexico was limited on Thursday, and November’s Mexico Trade Balance figures due on Friday are set to continue being eclipsed by one last print of the US Personal Consumption Expenditures (PCE) Price Index.

Wednesday’s late decline in the Mexican Peso, sparked by a broad-market pullback in equities and other risk assets, has evaporated on Thursday as pre-holiday market churn produces plenty of froth and market moves become harder to explain.

Daily digest market movers: Mexican Peso rebounds to familiar highs in a risk-bid resurgence

Mexican Peso climbs back into familiar highs against the US Dollar as stock markets rally.
Broad-market risk appetite rebound sees the MXN up around half a percent against the USD.
Mexico inflation for the first half-month of December came in above expectations but still declined from the previous period’s 0.63%, printing at 0.52% for the first two weeks of the month versus the forecast decline to 0.4%.
The Greenback is the single worst-performing currency of the majors on Thursday.
Easing inflation and growth figures from the US are ramping up market bets of even further rate cuts in 2024.
US Initial Jobless Claims rose to 205K from 203K (revised upwards slightly from 202K), undercutting the market forecast of 215K.
Money market rate cut expectations have run far ahead of the Fed’s dot plot; investors see 160 basis points in rate cuts for 2024 versus the Fed’s own expectations of 75 bps.
US Core PCE inflation settled at 2.0% in the third quarter, below the median market forecast of a hold at 2.3%.
US Annualized Gross Domestic Product (GDP) also undercut forecasts, printing at 4.9% compared to the expected print of 5.2%.
Mexico November Trade Balance (in USD terms) is expected to rebound from -252 million to 404 million.
November’s YoY US Core PCE Price Index inflation, forecast to decline from 3.5% to 3.3%, will be the headliner on Friday and set overall market direction heading into the holiday break.

US Dollar price today

The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Australian Dollar.

	USD	EUR	GBP	CAD	AUD	JPY	NZD	CHF
USD		-0.50%	-0.36%	-0.54%	-0.90%	-0.90%	-0.56%	-0.68%
EUR	0.50%		0.14%	-0.02%	-0.38%	-0.36%	-0.04%	-0.18%
GBP	0.36%	-0.15%		-0.16%	-0.52%	-0.55%	-0.20%	-0.33%
CAD	0.54%	0.02%	0.17%		-0.35%	-0.35%	-0.02%	-0.15%
AUD	0.88%	0.38%	0.53%	0.35%		0.02%	0.33%	0.20%
JPY	0.89%	0.36%	0.54%	0.33%	0.02%		0.33%	0.18%
NZD	0.56%	0.04%	0.19%	0.02%	-0.33%	-0.32%		-0.14%
CHF	0.68%	0.17%	0.32%	0.15%	-0.21%	-0.21%	0.12%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).

Technical analysis: Mexican Peso recovers to near-term upper bound

The Mexican Peso (MXN) is pushing back into recent highs against the US Dollar, driving the USD/MXN pair back into the 17.05 neighborhood after etching in a fresh 12-week low of 17.02.

Despite the USD/MXN’s recent downside, meaningful momentum remains limited for the Mexican Peso, and chart activity is set to continue squeezing into consolidation as the 50-day and 200-day Simple Moving Averages (SMA) congest just above the 17.50 level.

It will take a decisive break of support at 16.75 to chalk in a new low for the year and kick off a new uptrend in the Peso for 2024, while any USD/MXN bullish reversals are going to see stiff resistance as a pattern of lower highs sees confluence between the major moving averages and the last swing high.

USD/MXN Hourly Chart

USD/MXN Daily Chart

Mexican Peso FAQs

What key factors drive the Mexican Peso?

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

How do decisions of the Banxico impact the Mexican Peso?

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.

How does economic data influence the value of the Mexican Peso?

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

How does broader risk sentiment impact the Mexican Peso?

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

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