The Mexican Peso (MXN) strengthened on Thursday, recovering some of its recent losses against the US Dollar (USD) as weak US economic data and easing concerns over the French elections bolstered the currency. A hawkish comment from Banxico Deputy Governor Jonathan Heath further supported the MXN’s rebound.
Market Drivers: Cooling US Economy and Shifting Fed Expectations
- Weak US Data: Disappointing US ISM Services PMI and jobless claims data have raised concerns about the US economy’s health, increasing expectations of Fed rate cuts and putting pressure on the US Dollar.
- Hawkish Banxico Commentary: Jonathan Heath’s remarks, echoing Fed Chair Powell’s cautious stance on rate cuts, have reassured investors about the Mexican central bank’s commitment to tackling inflation.
- Easing French Election Risks: The reduced likelihood of a far-right majority in the French elections has calmed market nerves and supported the Euro, indirectly benefiting the MXN.
Technical Analysis: USD/MXN Pulls Back, Range-Bound Potential Emerges
The USD/MXN pair is retracing from its recent high of 18.59, heading towards the June 24 low of 17.87. The pair could be entering a sideways trend, although more data is needed for confirmation. A break below 18.10 would strengthen the case for a further decline towards 17.87, while a rebound above 18.59 could signal a resumption of the uptrend, targeting 18.68 and 19.00.
Key Takeaways:
- The Mexican Peso is regaining strength on the back of weakening US economic data and easing political risks in France.
- The Fed’s policy trajectory and the outcome of the French elections will be crucial for determining the MXN’s future direction.
- Technical analysis suggests a potential for a range-bound or bearish trend for the USD/MXN pair in the near term.
