The Mexican Peso recovered some ground against the Greenback on Tuesday after touching a two-month low, shrugging off worse-than-expected data that hinted at the economy slowing down. Federal Reserve (Fed) officials continued to grab the headlines on the US front amid a scarce economic schedule. At the time of writing, the USD/MXN trades at 19.94, down 0.14%.
The Insituto Nacional de Estadística Geografía e Informatica (INEGI) revealed that economic activity in August plummeted sharply in monthly figures, while it dipped annually. The data reassures the latest review by the International Monetary Fund (IMF), which estimated that the economy would grow at a 1.5% pace, contrary to the 3% economic expansion that the Secretaria de Hacienda y Credito Public (SHCP) foresees.
On Wednesday, Retail Sales for the same period are also expected to show the ongoing economic slowdown.
USD/MXN traders are eyeing the release of October’s mid-month Inflation figures. The headline inflation is expected to drop from 4.66% to 4.65%, while the underlying inflation is estimated to fall from 3.95% to 3.82%.
Across the border, San Francisco Fed President Mary Daly favored further adjustments to the fed funds rate, said the central bank would be data-dependent, and that she hasn’t seen anything that wouldn’t suggest continuing cutting rates.
Meanwhile, Kansas City Fed President Jeffrey Schmid adopted a more cautious stance, adding that he prefers to avoid outsized rate cuts, noting that they’re seeing a normalization of the labor market, not a deterioration.
Ahead this week, Mexico’s economic schedule will be slightly busy with the release of Retail Sales and Mid-Month Inflation for October. In the US, Fed speakers, jobs data, and S&P Global Flash PMIs should influence the direction of USD/MXN.
The USD/MXN uptrend remains in place despite dipping to a daily low of 19.76. Momentum shows buyers are losing pace as depicted by the Relative Strength Index (RSI). However, the RSI remains bullish, an indication that the exotic pair might consolidate before printing a leg-up.
If USD/MXN clears the 20.00 figure, the next resistance would be the September 5 high at 20.14 and the year-to-date (YTD) high at 20.22. On further strength, the next stop would be 20.50, ahead of 21.00.
Conversely, if the USD/MXN extends its losses below the October 18 low of 19.64, a test of the October 10 daily peak at 19.61 is on the cards. Next would be the October 4 swing low of 19.10 before testing 19.00.
The 1st half-month core inflation index released by the Bank of Mexico is a measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. The purchase power of Mexican Peso is dragged down by inflation. The inflation index is a key indicator since it is used by the central bank to set interest rates. Generally speaking, a high reading is seen as positive (or bullish) for the Mexican Peso, while a low reading is seen as negative (or Bearish).
Read more.Next release: Thu Oct 24, 2024 12:00
Frequency: Monthly
Consensus: 0.4%
Previous: 0.09%
Source: National Institute of Statistics and Geography of Mexico
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