- USD/MXN falls back to multi-year lows as USD fails to capitalize on risk aversion.
- The dollar falls despite President Biden’s controversial tax proposal, rising yields and hawkish expectations around the Fed.
- Banxico is clearer than the Fed on raising rates, with no rumors of a turn in monetary policy, which boosts the Mexican peso.
The pair USD/MXN falls back to 17.92 during the early hours of the European session on Thursday, after a failed attempt to recover from the lowest levels since September 2017 reached the previous day at 17.90. The pair peaked at 17.99 on its rally before falling again. The latest weakness in the pair ignores risk aversion sentiment as it prepares for key Mexican inflation data.
Market sentiment deteriorates as US President Joe Biden’s proposal to raise taxes looks like an additional economic burden amid looming recession troubles. Having said that, Biden proposes raising corporate tax from 21% to 28% in his latest budget guide before its publication on Friday. The American leader also points to a 25% tax for billionaires and big taxes for wealthy investors.
Besides, Disappointment over inflation data from China also dampens the prospects for recovery in the world’s second-largest economy and weighs on risk appetiteso it should have supported the safe-haven demand for the US dollar.
In the same vein, Fed Chairman Jerome Powell repeated his hawkish speech about his willingness to raise interest rateswhile highlighting higher than expected inflationary pressure. This bolstered expectations of a 50 basis point rate hike from the Fed, but Powell’s second testimony this week did not add anything new to what had already been heard on Tuesday and therefore traders. of the US dollar were mostly fearful of taking any major action.
On the other hand, Banxico seems clearer in its hawkish monetary policy bias and it has already signaled a new rate hike at its last monetary policy meeting, where the Mexican central bank raised the benchmark rate by 50 basis points.
Against this background, S&P 500 futures reversed the previous day’s rebound from one-week lows, while refreshing the intraday low around 3,985 points. Along the same lines, 10-year US Treasury yields rise to 3.99% while its 2-year counterpart pares intraday losses to close to 5.05%. It should be noted that the US yield curve inversion widened to the highest levels since 1981 and fueled recession fears the day before.
Although USD/MXN bears are in control, the pair’s further moves depend on Mexican inflation data for February.
USD/MXN Technical Analysis
A daily close below the April 2018 lows around 17.90 is necessary for the bears to maintain control. That being said, the oversold RSI (14) challenges further USD/MXN decline.
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.
