- USD/MXN trims losses, trading at around 17.50s, as weak US economic data prompts greenback buying.
- Disappointing US PPI and higher Initial Jobless Claims signal a slowing US economy, impacting the Mexican Peso.
- Investors watch US debt ceiling discussions, with President Biden resuming talks with Congress leaders on Friday.
USD/MXN trims some of its earlier losses, which sent the pair falling to new six-year lows in the New York session. But a tranche of economic data from the United States (US) prompted traders to buy the greenback, to the detriment of the emerging market currency, which is weakening close to 0.20%. At the time of writing, the USD/MXN is trading at 17.5917.
Emerging market currency falters as US Dollar rallies amid a slowing economy
An absent economic agenda in Mexico left the Mexican Peso (MXN) leaning on the dynamics of the greenback, which found a bid in the New York session and rallied sharply, as shown by the US Dollar Index (DXY). The DXY, a measure of the performance of six currencies vs. the US Dollar (USD), climbs 0.64%, up at 102.063, underpinned by weak US economic data.
The US calendar featured the Producer Price Index (PPI) for April, which came lower than expected, with readings at 2.3% YoY, below 2.4% forecasts; while the core PPI climbed 3.2% YoY, beneath estimates of 3.3%. Besides that, the Initial Jobless Claims for the last week exceeded estimates of 245K, with claims jumping to 264K. The data revealed that the US economy is slowing down, opening the door for the US central bank to hold rates unchanged at the upcoming June meeting and weakening the US Dollar.
In the last week, the US Federal Reserve lifted rates by 25 bps to the 5.00% - 5.25% area and Fed Chair Powell and Co. opened the door for a pause on its cycle. However, Jerome Powell stressed that on their baseline scenario, they’re not projecting rate cuts in 2023; but money market futures do. The CME FedWatch Tool shows investors are pricing 75 bps of rate cuts by the December 2023 meeting, estimating the Federal Funds Rate (FFR) to finish at around 4.25% - 4.50%.
In the meantime, Minnesota Fed President Neil Kashkari pushed back against rate cuts in 2023 and said that although inflation is cooling, it remains stickier. He added, “We will have to keep at it for an extended period.”
Investors are also watching the discussions regarding the US debt ceiling, which did not progress as expected. US President Joe Biden would resume talks with US Congress leaders on Friday.
Upcoming events
The US economic docket will feature the University of Michigan Consumer Sentiment and inflation expectations for one and five-year horizon, alongside Federal Reserve officials crossing the wires. The Mexican agenda will reveal Industrial Production in March, expected at -0.2% MoM and 2.7% YoY.
USD/MXN Price Analysis: Technical outlook
The USD/MXN remains in a strong downtrend, though it bounced off the weekly lows and recorded an inverted hammer at around the yearly lows. That indicates sellers are taking a respite before challenging the July 2017 low of 17.4498 before testing the 17.00 figure.
Oscillators like the Relative Strength Index (RSI) indicator and the 3-day Rate of Change (RoC) are in bearish territory, with the former at oversold conditions. Hence, further losses are expected in the USD/MXN.
Otherwise, if USD/MXN breaks above the May 10 daily high at 17.7724, that would expose the 20-day Exponential Moving Average (EMA) at 17.9004. Upside risks lie at 18.0000, which, once broken, buyers would pile in to test the 50-day EMA at 18.1382 before driving the price toward 18,50.
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
EUR/USD turns negative near 1.1000, Dollar trims losses
The now mild bounce in the US Dollar puts EUR/USD under pressure and drags it back to the proximity of the 1.1000 support as investors continue to assess the stronger-than-expected NFP figures in March (+228K).
GBP/USD stays offered around 1.3000 on USD-buying
The now generalised selling pressure hurting the risk complex sends GBP/USD back to the 1.3000 neighbourhood amid heavy losses and the marked rebound in the Greenback, particulalry following solid prints from the US labour market report.
Gold remains on the back foot around $3,000 after US Payrolls
In the wake of March’s US labour market report, Gold prices maintain their offered tone around the critical $3,000 mark per troy ounce amid marginal gains in the Greenback and further weakness in US yields.
Can Maker break $1,450 hurdle as whales launch buying spree?
Maker holds steadily above $1,250 support as a whale scoops $1.21 million worth of MKR. Addresses with a 100k to 1 million MKR balance now account for 24.27% of Maker’s total supply. Maker battles a bear flag pattern as bulls gather for an epic weekend move.
Strategic implications of “Liberation Day”
Liberation Day in the United States came with extremely protectionist and inward-looking tariff policy aimed at just about all U.S. trading partners. In this report, we outline some of the more strategic implications of Liberation Day and developments we will be paying close attention to going forward.
The Best brokers to trade EUR/USD
SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.