- USD/MXN holds steady near 17.1200 as easing US inflation slows US Dollar’s climb, despite concerning Mexican jobs data.
- US Dollar Index drops more than 0.50% after the softer-than-expected inflation report, allowing breathing space for the peso.
- Expectations of unchanged rates from Banxico favor MXN, potentially signaling further downside for the USD/MXN pair.
USD/MXN stays firm around the 17.1200 region as softer-than-expected inflation data in the United States (US) weighed on the US Dollar (USD), putting a lid on the USD/MXN advancement. Jobs data revealed in Mexico showed some deterioration, though the Unemployment Rate remains at 3%. At the time of writing, the USD/MXN is trading at 17.1204, almost flat, after hitting a daily low of 17.0440.
US Dollar’s rally tempers despite the deterioration in the Mexican labor market, as easing US inflation weighs on the buck
According to the US Department of Commerce report, US inflation decelerated in May. The US Federal Reserve (Fed) preferred gauge for inflation, the Core PCE, slowed from 4.7% to 4.6% YoY, aligned with estimates, as monthly figures edged lower, flashing signs of cooling down. The Personal Consumption Expenditure (PCE) as a whole edged lower sharply, past the 4% threshold, at 3.8% YoY from April 4.4%, with MoM data slowing to 0.3% from 0.3%.
Later the Chicago PMI improved to 41.5 but remained in contractionary territory. The University of Michigan (UoM) revealed June’s latest poll, with Consumer Sentiment hitting the 64.4 threshold, above the preliminary reading of 63.9.
On the Mexican front, unemployment increased and damaged the Mexican Peso (MXN) prospects. The labor market lost 648,340 jobs in May, its worst performance for a May report since records began in 2005, as reported by the Encuesta Nacional de Ocupación y Empleo (ENOE). The seasonally adjusted unemployment rate hit 3.0% in May, though headline figures were 2.9%.
After the US and Mexican data release, the USD/MXN climbed from 17.0600 to a four-day high of 17.1712 before trimming 5 cents, as the USD/MXN slid to the 17.1200 area. US Treasury bond yield continued to edge lower and weighed on the greenback. The US Dollar Index (DXY), which tracks the performance of a basket of six currencies against the US Dollar, drops more than 0.50%, slumping to 102.830.
Regarding central banks and expectations for monetary policy, the Fed is foreseen to raise rates in July, with odds at 87%, as reported by the CME FedWatch Tool. However, estimates for an additional quarter of percentage raise in November slid compared to yesterday’s odds at around 36%. The Bank of Mexico (Banxico) is expected to keep rates unchanged after two back-to-back meetings holding rates at 11.25%. That said, the interest rate differential still favors the MXN; hence further downside is expected in the USD/MXN pair.
USD/MXN Price Analysis: Technical outlook
The USD/MXN remains in choppy trading price action, capped within the 17.00-17.20 area, unable to pierce the 20-day Exponential Moving Average (EMA) at 17.2303, seen as the first resistance level for buyers. That would not be enough to shift the USD/MXN’s downtrend, as the May 17 low turned resistance at 17.4038 remains in a safe place and is the next price level to watch for buyers and sellers if the USD/MXN surpasses the 20-day EMA. Conversely, a fall below 17.0500 will expose the year-to-date (YTD) low of 17.0219 before the USD/MXN challenges 17.00.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD consolidates below 0.6600 amid the US election uncertainty
AUD/USD remains on the defensive below the 0.6600 mark on Tuesday as traders seem reluctant ahead of this week's key event risks – the US presidential election and the FOMC policy meeting. In the meantime, the unwinding of the Trump trade continues to weigh on the USD and offers some support to the currency pair.
EUR/USD posts modest gains above 1.0850, all eyes on the US presidential election results
The EUR/USD pair trades with mild gains near 1.0880 during the early Asian session on Tuesday. The US Dollar edges lower as traders brace for the outcome of the US presidential election and a likely interest rate cut from the Federal Reserve, which supports some support for the major pair.
Gold trades around $2,730
Gold price is on the defensive below $2,750 in European trading on Monday, erasing the early gains. The downside, however, appears elusive amid the US presidential election risks and the ongoing Middle East geopolitical tensions.
RBA widely expected to keep interest rate unchanged amid persisting price pressures
Australia’s benchmark interest rate is set to stay unchanged at 4.35% in November. The focus remains on Reserve Bank of Australia Governor Michele Bullock’s comments and updated economic forecasts. The Australian Dollar could wilt if RBA Governor Bullock ramps up bets for a December rate cut.
US presidential election outcome: What could it mean for the US Dollar? Premium
The US Dollar has regained lost momentum against its six major rivals at the beginning of the final quarter of 2024, as tensions mount ahead of the highly anticipated United States Presidential election due on November 5.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.