The Mexican Peso (MXN) shows marginal gains against the US Dollar (USD) on Thursday amidst mixed economic data and continued speculation on potential US interest rate cuts. Currently, USD/MXN trades at 16.54, registering a slight 0.01% decline.
Mexico: Signs of Economic Growth, Remittances Drive Peso Strength
March data from Mexico’s National Statistics Agency (INEGI) reveals a decline in Consumer Confidence, signaling a potential slowdown as higher interest rates set by the Bank of Mexico (Banxico) take effect. However, robust remittances continue to be a major driver of Peso strength. While there is speculation about the benefits of near-shoring, 2023 figures show that remittances ($63.345 billion) significantly outpace Foreign Direct Investment (FDI) at $36.058 billion, highlighting a potential gap in Mexico’s productive capacity.
US: Labor Market Cools, Fed Commentary in Focus
The US labor market showed signs of cooling as unemployment benefit applications increased, while the trade deficit widened. Meanwhile, persistent commentary from Federal Reserve officials regarding potential rate cuts further pressures the US Dollar.
Technical Outlook: Peso Bulls Eye Further Downside
USD/MXN maintains a bearish bias, with sellers targeting a retest of the year-to-date (YTD) low at 16.51. Recent consolidation near the 16.50 level could pave the way for a move towards the psychological barrier of 16.00, with the October 2015 low at 16.32 offering additional downside potential.
Conversely, a rebound in USD/MXN would require bulls to clear the 16.70 resistance. Further upward targets include the 50-day Simple Moving Average (SMA) at 16.91, the 100-day SMA at 17.02, and the 200-day SMA at 17.18.
