- The Mexican Peso held steady on Tuesday following Monday’s 1.2% backslide.
- Banxico recently delivered a rate cut despite an uptick in headline inflation figures.
- Mexico’s central bank expects inflation bump to smooth out.
The Mexican Peso (MXN) held close to flat on Tuesday, paddling around 19.00 as Peso traders find their balance following a 1.2% drop in the MXN’s value against the Greenback. The Bank of Mexico (Banxico) recently cut interest rates by a quarter-point despite an uptick in headline inflation.
US Producer Price Index (PPI) figures released on Tuesday showed business-level inflation eased in July, softening the Greenback and giving the Peso a foothold as markets pivot to focusing on September rate cut expectations.
Daily digest market movers: Peso-Dollar tug-of-war continues after USD eases on cooling PPI
- US PPI inflation for the year ended in July eased to 2.2%, below the forecast of 2.3%, while the previous period was revised to 2.7% from the initial 2.6%.
- Core US PPI inflation dropped to 2.4% YoY versus the expected 2.7%, falling even further from the previous 3.0%.
- Rate markets edged up bets of a double rate cut from the Federal Reserve (Fed) in September following Tuesday’s PPI print.
- According to the CME’s FedWatch Tool, rate markets are pricing in roughly 55% odds of a 50-basis-point cut on September 18, with 45% odds of at least a 25 bps trim.
- Key US data will continue through the week with July’s Consumer Price Index (CPI) slated to print on Wednesday. Investors expect inflation figures to continue easing.
Economic Indicator
Producer Price Index (YoY)
The Producer Price Index released by the Bureau of Labor statistics, Department of Labor measures the average changes in prices in primary markets of the US by producers of commodities in all states of processing. Changes in the PPI are widely followed as an indicator of commodity inflation. Generally speaking, a high reading is seen as positive (or bullish) for the USD, whereas a low reading is seen as negative (or bearish).
Mexican Peso price forecast: Peso bulls look for a floor
The Mexican Peso (MXN) is grappling with the 19.00 handle as USD/MXN traders try to keep the pair pinned. Greenback bidders are struggling to find the gas pedal on a Dollar-negative Tuesday, giving the Peso a chance to extend near-term gains.
USD/MXN hit a 22-month high last week above 20.00, but Peso bulls have returned to the fold, chalking in a 6.44% recovery peak-to-trough. The pair remains firmly pinned on the high side of the 200-day Exponential Moving Average (EMA) at 17.59, and a firm pattern of higher lows is bolstering technical support in favor of the Greenback.
USD/MXN daily chart
Economic Indicator
Consumer Price Index (MoM)
Inflationary or deflationary tendencies are measured by periodically summing the prices of a basket of representative goods and services and presenting the data as The Consumer Price Index (CPI). CPI data is compiled on a monthly basis and released by the US Department of Labor Statistics. The MoM figure compares the prices of goods in the reference month to the previous month.The CPI is a key indicator to measure inflation and changes in purchasing trends. Generally, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish.
The US Federal Reserve has a dual mandate of maintaining price stability and maximum employment. According to such mandate, inflation should be at around 2% YoY and has become the weakest pillar of the central bank’s directive ever since the world suffered a pandemic, which extends to these days. Price pressures keep rising amid supply-chain issues and bottlenecks, with the Consumer Price Index (CPI) hanging at multi-decade highs. The Fed has already taken measures to tame inflation and is expected to maintain an aggressive stance in the foreseeable future.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
