- The Mexican peso is weakening from the key 20.00 area due to the strengthening of the US dollar ahead of the Fed’s decision.
- Strong data from the US strengthened speculation that the Fed will adopt a hawkish stance after Wednesday’s interest rate cut.
- From a broader perspective, USD/MXN is in a bearish trend but needs additional support to break above the 20.00 level.
On Tuesday, the Mexican peso (MXN) traded within striking distance of the key level of 20.00 against the US dollar (USD). Investors are bidding their time ahead of key monetary policy decisions made this week by the Federal Reserve (Fed) and the Bank of Mexico (Banxico).
Preliminary data from the US S&P Global Purchasing Managers Index (PMI) published on Monday revealed an unexpected improvement in activity in services in December, and the market is preparing for a mighty consumption reading for November, which will take place at the end of the day today.
These numbers validate the rhetoric of U.S. economic exceptionalism and strengthen the case for very gradual Fed rate cuts next year. This sentiment keeps investors’ risk appetite in check, pushing up U.S. Treasury yields and supporting the U.S. dollar overall.
In Mexico, retail consumption is expected to pick up in October, still at levels much lower in the same month than last year. Consumer inflation and industrial production data disappointed last week, strengthening the case for Banxico’s 25 basis point (bp) rate cut on Thursday.
Daily Market Roundup: US Dollar Resumes Rally and Everyone’s Eyes on the Fed
- The US dollar index (DXY) is trading higher on Tuesday, approaching multi-week highs amid higher US Treasury yields and market expectations for a hawkish cut by the Fed on Wednesday.
- US Treasury yields continue to rise. The benchmark 10-year bond yield has climbed above 4.40% in seven days of growth, after rebounding to 4.13% early last week.
- The flash PMI for services in the US rose to 58.5 in December, the best result in over three years, from 56.1 in November, amid expectations of a moderate slowdown to 55.7.
- The flash U.S. manufacturing PMI fell to 48.3 from 49.7 in November, but aggregate data points to well economic growth in the final quarter of the year.
- U.S. retail sales are expected to grow 0.5% in November, up from 0.4% in the previous month. Excluding cars, consumption is growing at a rate of 0.4% from 0.1% in the previous month.
- CME’s FedWatch tool shows the Fed’s Wednesday 25-bp rate cut is almost fully on board, with the market expecting one or two such cuts next year.
- In Mexico, retail sales are expected to grow 0.2% in October, up from 0.1% in September. However, compared to October last year, they are expected to drop by 1.6%.
- The Bank of Mexico is expected to cut interest rates by 25 basis points to 10.00% on Thursday amid growing concerns that rising U.S. tariffs will hit the Mexican economy.
Today’s price in US dollars
The table below shows the current percentage change of the United States Dollar (USD) against the major listed currencies. The US dollar was strongest against the Australian dollar.
| USD | EUR | GBP | JPY | BOOR | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.21% | -0.08% | -0.28% | 0.20% | 0.43% | 0.35% | 0.23% | |
| EUR | -0.21% | -0.28% | -0.50% | -0.01% | 0.22% | 0.14% | 0.03% | |
| GBP | 0.08% | 0.28% | -0.20% | 0.28% | 0.51% | 0.43% | 0.33% | |
| JPY | 0.28% | 0.50% | 0.20% | 0.48% | 0.72% | 0.62% | 0.54% | |
| BOOR | -0.20% | 0.00% | -0.28% | -0.48% | 0.24% | 0.15% | 0.05% | |
| AUD | -0.43% | -0.22% | -0.51% | -0.72% | -0.24% | -0.08% | -0.20% | |
| NZD | -0.35% | -0.14% | -0.43% | -0.62% | -0.15% | 0.08% | -0.10% | |
| CHF | -0.23% | -0.03% | -0.33% | -0.54% | -0.05% | 0.20% | 0.10% |
The heat map shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column and the quote currency from the top row. For example, if you select the US dollar from the left column and move along the horizontal line to the Japanese yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Mexican Peso Technical Outlook: USD/MXN has mighty support around 20.00
USD/MXN is down from slow November highs near 20.80, but the psychological level of 20.00 is keeping downside attempts. The pair has been consolidating between the mentioned support of 20.00 and 20.30 for the last seven trading days.
The Mexican peso would need additional momentum to break the 20.00 level against the US dollar and turn its attention towards the lows of October 24, 25 and November 7 at 19.75.
On the other hand, the USD/MXN pair needs to confirm above 20.30 before reaching the December 2 high of 20.60 and the November high of around 20.80.
