The Mexican peso is falling due to faint consumer confidence and risk aversion

The Mexican peso weakens by 0.51% against the US dollar, with the USD/MXN exchange rate at 19.33 as consumer confidence in Mexico declines.
Fear of an economic slowdown in China weighs on emerging market currencies, strengthening the dollar.
Former US President Donald Trump mentions 200% tariffs on imports of Mexican vehicles, which deepens market concerns.

At the beginning of the week, the Mexican peso weakened against the US dollar and fell by over 0.51%. Weaker-than-expected data from Mexico, combined with concerns about an economic slowdown in China, weighed on most emerging market currencies and contributed to the rise of the US dollar. The USD/MXN rate is 19.33, up 0.44%.

The Instituto Nacional de Estadistica Geografia e Informatica (INEGI) revealed that consumer confidence in Mexico deteriorated in September and fell significantly compared to August data, which was the highest since February 2019.

Meanwhile, China’s Finance Minister Lan Foan revealed that the government will continue to provide stimulus, support the real estate market and replenish the capital of state-owned banks as part of efforts to boost the economy.

China is facing intense deflationary pressures caused by a pointed slowdown in the real estate market and deteriorating consumer confidence.

Former President Donald Trump has suggested imposing more than 200% tariffs on vehicles imported from Mexico, he said in an interview on Fox on Sunday.

In the United States, limited economic data left traders stranded, and comments from Minneapolis Fed President Neel Kashkari left them uncertain. Kashkari said he expected “further moderate reductions in our interest rates.” He added that the latest employment data shows a forceful labor market and that the economy is in the final stages of returning inflation to 2%.

U.S. economic reports will continue to be limited in terms of data in the coming week, although Fed officials will speak during the week. The New York Empire State Manufacturing Index on Tuesday, followed by the trade balance on Wednesday and a tight schedule on Thursday could dictate the direction of the USD/MXN pair.

Daily Market Change Summary: Mexican Peso on the Defensive Amid Surge in USD/MXN

Consumer confidence in Mexico deteriorated from 47.6 to 47.1 in September. Most components are down except for current conditions compared to last year. Additionally, the data showed that Mexican households would be less likely to purchase robust goods.
According to a Banxico survey, the central bank is expected to cut interest rates by 50 basis points to 10% by the end of 2024. Meanwhile, the USD/MXN rate will end near 19.69.
Mexico’s economy is projected to grow by 1.45% in 2024, down from August’s 1.57%.
On Tuesday, the US economic report will include the New York Empire State Manufacturing Index for October, which is expected to drop from 11.3 to 2.3.
Federal Reserve officials, led by Mary Daly of the San Francisco Fed, board chair Adriana Kugler and Raphael Bostic of the Atlanta Fed, will cross the wires.
Data from the Chicago Board of Trade via the December Federal Funds Rate Futures show that investors estimate the Fed’s late-2024 rate to be 49 basis points.

USD/MXN Technical Outlook: Mexican Peso Falls, USD/MXN Rise Above 19.30

USD/MXN’s uptrend remains unchanged even though the pair failed to break the October 10 intraday high of 19.61. At the time of writing, momentum is supporting buyers as shown by the Relative Strength Index (RSI). Nevertheless, this pair’s rally may be short-lived unless the RSI breaks through the 50 neutral line.

If USD/MXN rises above 19.50, it will expose the previously mentioned 19.61 level. If broken, the next resistance level will be the October 1 intraday high of 19.82, before 8 p.m. Next will be a year-to-date high of 20.22.

Conversely, if USD/MXN falls below the October 4 low of 19.10, the value at 19.00 will be exposed. After the break, the next support will be the 100-day SMA at 18.75.