- The USD/MXN pair is trading at 17.2607, with the Dollar gaining 0.20%, as risk aversion sentiment prevails in the market.
- US inflation data due on Wednesday could turn the tide; CPI is expected to increase from 3.2% to 3.6% year-on-year.
- Mexico’s economic package for 2024 proposes an increase in the fiscal deficit to 4.9% of GDP, the highest in 36 years.
He Mexican peso (MXN) loses some ground to the US dollar (USD) after strengthening to 17.2688, but the latter regains some composure as the North American session progresses. A thin US economic agenda and risk aversion momentum keep investors seeking safety ahead of US inflation data. USD/MXN is trading at 17.2607.
The Mexican Peso falls slightly as investors wait for the US CPI and digest Mexico’s economic package for 2024
Risk aversion is driving the dollar against the Mexican peso, while US stocks continue to trade with losses, except for the Dow Jones. Market participants are preparing for the release of US August inflation data on Wednesday. The Consumer Price Index (CPI) is expected to rise from 3.2% to 3.6% year-on-year, while the core CPI will fall from 4.7% to 4.3%.
While waiting for these data, the Dollar advances 0.20%, as shown by the Dollar Index (DXY), which follows the evolution of the dollar against six currencies. The DXY stands at 104.74, supported by the advance of the 2-year US Treasury yield, which reaches a high of 5.00%.
A risk-off push and firming US Treasury yields support the dollar ahead of the release of August US inflation data. The 10-year US Treasury bond yield stands at 4.292%, unchanged from yesterday, unlike the US dollar (USD), as shown by the Dollar Index (DXY). The DXY tracks the Dollar against a basket of six currencies and prints solid gains of 0.30% to 104.83 after falling to a four-day low of 104.42.
In the United States, the Bureau of Labor Statistics (BLS) will publish inflation data for August on Wednesday. The Consumer Price Index (CPI) is expected to rise from 3.2% to 3.6% year-on-year, while the core CPI will fall from 4.7% to 4.3%. A higher-than-expected inflation figure would revive speculation about a new rate hike by the US Federal Reserve.
On the other side of the border, Mexico’s economic package for 2024 proposes an increase in the fiscal deficit from 3.3% to 4.9% of GDP in 2023, the most significant negative balance in 36 years. The budget assumes that the USD/MXN exchange rate will average 17.60 at the end of 2025, while considering that Mexican oil exports will sell for about $56.7 per barrel next year.
Given the fundamental backdrop, USD/MXN will likely continue lower unless tomorrow’s CPI data beats estimates and puts another interest rate hike on the table. Otherwise, further strength in the Mexican Peso is expected, which could take the pair back towards the 17.0000 barrier.
USD/MXN Price Analysis: Technical Outlook
From a daily chart perspective, the pair is challenging the technical support of the 100-day moving average (DMA) at 17.2558, which limited the decline of USD/MXN. A daily close below the latter, and the pair could test the 20-DMA at 17.0929 before falling towards the psychological price level of 17.0000. For a bullish resumption, the exotic pair must reclaim the 17.5000 zone before testing the 9/11 high at 17.5927.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
