Mexican Peso holds steady on Banxico minutes, soft US CPI
-
Mexican
Peso
fluctuates
amid
volatile
session
influenced
by
US
data. -
Banxico
minutes
reveal
potential
for
interest
rate
adjustments
as
inflation
is
expected
to
converge
by
Q4
2025. -
US
inflation
data
misses
estimate,
pushing
US
Treasury
yields
and
USDollar
Index
lower. -
Mixed
US
data
and
strong
carry
trade
demand
keeping
Peso
resilient
against
weakening
Greenback.
The
Mexican
Peso
stood
firm
against
the
US
Dollar
after
the
Bank
of
Mexico
(Banxico)
revealed
its
last
meeting
minutes.
Additionally,
US
inflation
data
came
in
softer
than
expected,
opening
the
door
for
the
Fed
to
lower
borrowing
costs.
The
USD/MXN
trades
at
17.83,
virtually
unchanged.
Banxico’s
June
minutes
showed
that
the
board
foresees
an
inflationary
environment
that
may
allow
for
discussing
adjustments
to
interest
rates.
They
acknowledged
that
the
labor
market
remains
robust,
yet
growth
has
shown
signs
of
moderation.
Some
members
project
growth
to
be
lower
than
expected
as
Mexico’s
economic
activity
has
been
weak
since
the
end
of
2023.
Most
policymakers
mentioned
that
inflation
will
converge
toward
the
target
in
the
last
quarter
of
2025.
Across
the
border,
US
Treasury
bond
yields
and
the
Greenback
tanked
as
US
inflation
was
softer
than
expected,
while
the
number
of
Americans
filing
for
unemployment
claims
came
below
estimates
and
the
previous
reading.
The
US
Dollar
Index
(DXY),
which
tracks
the
value
of
a
basket
of
six
currencies
against
the
US
Dollar,
tanks
more
than
0.50%
and
is
down
at
104.41.
The
US
10-year
Treasury
note
is
slipping
more
than
10
basis
points
(bps)
at
4.17%,
a
level
last
seen
on
March
13,
2024.
Mixed
US
data
helped
to
cap
American
currency
losses
against
the
Peso,
which
had
remained
one
of
the
most
sought
carry-trade
currencies.
Daily
digest
market
movers:
Mexican
Peso
hurt
by
Banxico
minutes
-
Banxico’s
board
members
added
that
services
inflation
does
not
show
a
clear
downward
trend,
which
was
one
of
the
reasons
for
keeping
rates
unchanged
at
the
June
meeting. -
They
commented
that
trading
conditions
experienced
significant
disruptions
and
added
that
the
Mexican
Peso
depreciated
considerably. -
Mexico’s
June
inflation
figures
were
higher
than
expected
due
to
a
rise
in
food
prices
when
most
economists
expect
Banxico
to
resume
lowering
interest
rates. -
June
US
Consumer
Price
Index
(CPI)
contracted
-0.1%
MoM,
below
estimates
of
a
0.1%
increase.
Core
CPI
ticked
lower,
down
a
tenth
from
0.2%
in
May,
and
the
consensus
was
0.1%
MoM
in
June. -
In
the
12
months
to
June,
headline
CPI
was
3%,
down
from
3.3%,
and
underlying
inflation
was
below
estimates,
and
the
previous
month’s
3.4%
came
at
3.3%. -
Initial
Jobless
Claims
for
the
week
ending
July
6
missed
the
mark
and
came
in
better
than
the
consensus
of
236K
at
222K,
lower
than
the
previous
reading
of
239K. -
According
to
the
CME
FedWatch
Tool
data,
odds
for
a
September
cut
are
84%,
up
from
72%
on
Wednesday.
Technical
analysis:
Mexican
Peso
edges
higher
but
floats
around
17.80
The
USD/MXN
downtrend
remains
in
play,
though
Thursday’s
price
action
has
seen
some
consolidation
within
the
17.70-17.90
area.
Even
though
momentum
remains
bearish,
the
Relative
Strength
Index
(RSI)
flipped
flat
at
bearish
territory,
hinting
that
sellers
are
taking
a
respite.
In
the
event
of
a
bearish
continuation,
bears
need
to
clear
the
17.70
mark.
Once
surpassed,
the
next
stop
would
be
the
confluence
of
the
December
5
high
and
the
50-day
Simple
Moving
Average
(SMA)
near
17.56/57,
followed
by
the
200-day
SMA
at
17.26.
The
next
floor
level
would
be
the
100-day
SMA
at
17.19.
Conversely,
USD/MXN
buyers
need
to
clear
the
June
24
cycle
low
of
17.87
turned
resistance
before
challenging
the
psychological
18.00
figure.
Further
upside
is
seen
above
the
July
5
high
at
18.19,
followed
by
the
June
28
high
of
18.59,
allowing
buyers
to
challenge
the
YTD
high
of
18.99.
Mexican
Peso
FAQs
The
Mexican
Peso
(MXN)
is
the
most
traded
currency
among
its
Latin
American
peers.
Its
value
is
broadly
determined
by
the
performance
of
the
Mexican
economy,
the
country’s
central
bank’s
policy,
the
amount
of
foreign
investment
in
the
country
and
even
the
levels
of
remittances
sent
by
Mexicans
who
live
abroad,
particularly
in
the
United
States.
Geopolitical
trends
can
also
move
MXN:
for
example,
the
process
of
nearshoring
–
or
the
decision
by
some
firms
to
relocate
manufacturing
capacity
and
supply
chains
closer
to
their
home
countries
–
is
also
seen
as
a
catalyst
for
the
Mexican
currency
as
the
country
is
considered
a
key
manufacturing
hub
in
the
American
continent.
Another
catalyst
for
MXN
is
Oil
prices
as
Mexico
is
a
key
exporter
of
the
commodity.
The
main
objective
of
Mexico’s
central
bank,
also
known
as
Banxico,
is
to
maintain
inflation
at
low
and
stable
levels
(at
or
close
to
its
target
of
3%,
the
midpoint
in
a
tolerance
band
of
between
2%
and
4%).
To
this
end,
the
bank
sets
an
appropriate
level
of
interest
rates.
When
inflation
is
too
high,
Banxico
will
attempt
to
tame
it
by
raising
interest
rates,
making
it
more
expensive
for
households
and
businesses
to
borrow
money,
thus
cooling
demand
and
the
overall
economy.
Higher
interest
rates
are
generally
positive
for
the
Mexican
Peso
(MXN)
as
they
lead
to
higher
yields,
making
the
country
a
more
attractive
place
for
investors.
On
the
contrary,
lower
interest
rates
tend
to
weaken
MXN.
Macroeconomic
data
releases
are
key
to
assess
the
state
of
the
economy
and
can
have
an
impact
on
the
Mexican
Peso
(MXN)
valuation.
A
strong
Mexican
economy,
based
on
high
economic
growth,
low
unemployment
and
high
confidence
is
good
for
MXN.
Not
only
does
it
attract
more
foreign
investment
but
it
may
encourage
the
Bank
of
Mexico
(Banxico)
to
increase
interest
rates,
particularly
if
this
strength
comes
together
with
elevated
inflation.
However,
if
economic
data
is
weak,
MXN
is
likely
to
depreciate.
As
an
emerging-market
currency,
the
Mexican
Peso
(MXN)
tends
to
strive
during
risk-on
periods,
or
when
investors
perceive
that
broader
market
risks
are
low
and
thus
are
eager
to
engage
with
investments
that
carry
a
higher
risk.
Conversely,
MXN
tends
to
weaken
at
times
of
market
turbulence
or
economic
uncertainty
as
investors
tend
to
sell
higher-risk
assets
and
flee
to
the
more-stable
safe
havens.
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