- The Mexican Peso is currently facing the potential of further depreciation beyond the 100-day Simple Moving Average (SMA).
- The industrial production data from Mexico has significantly surpassed the initial forecast, which holds significant implications for the upcoming decision by Banxico on Thursday.
- The Federal Reserve anticipates maintaining interest rates at their current levels. However, there is a prevailing sense of uncertainty surrounding the forthcoming speech by Chairman Powell.
The Mexican Peso (MXN) exhibited a resurgent ascent against the US Dollar (USD) after the release of an inflation report in the United States (US), potentially impeding the US Federal Reserve (Fed) from expediting monetary policy easing beyond market participants’ projections.
During the latter part of the North American trading session, the currency pair USD/MXN was exchanged at a rate of 17.30, experiencing a decline of 0.39% after attaining its peak for the day at 17.43.
The economic indicators from Mexico reveal that Industrial Production continues to exhibit robust growth, thereby challenging the desired monetary policy stance of the Bank of Mexico (Banxico) to implement easing measures in Q1 2024. On the upcoming Thursday, it is widely anticipated that Banxico, the central bank of Mexico, will opt to maintain the prevailing interest rates at 11.25%.
Furthermore, market participants eagerly await the issuance of a statement by Banxico, which is projected to adopt a neutral stance, thereby refraining from expressing a bias towards either tightening or loosening monetary policy.
The US Bureau of Labor Statistics (BLS) has made a noteworthy proclamation regarding the ongoing disinflationary trajectory in the neighboring jurisdiction. This development has undoubtedly captured the attention of astute traders preparing themselves for the imminent decision by the Federal Reserve, scheduled to be announced on Wednesday.
It is anticipated that the United States central bank will maintain interest rates at their current level while simultaneously resisting the actions of assertive traders who speculate that the Federal Reserve will implement a significant 100 basis point policy easing in the upcoming year.
Mexican Peso Retaliates as the USD/Mxn Pair Continues to Fall Below the 100-day Simple Moving Average
- The industrial production in Mexico experienced a notable increase, reaching 5.5% during the twelve months ending in October. This growth surpassed the previous month’s figure of 3.9%, indicating a positive trend in the country’s industrial sector. The monthly statistics experienced a notable increase of 0.6%, surpassing the previous month’s growth rate of 0.2%.
- The inflation data from Mexico exhibited a blend of outcomes, albeit in line with the projected disinflation trajectory as anticipated by Banxico. In monetary policy, esteemed figures Governor Victoria Rodriguez Ceja and Deputy Governor Jonathan Heath have conveyed their views on the potential initiation of deliberations regarding interest rate reductions. As per their expert analysis, these discussions may commence during the initial quarter of 2024.
- The November US Consumer Price Index (CPI) exhibited a commendable alignment with market expectations, registering a year-on-year growth rate of 3.1%. Although this figure is slightly lower than the previous month’s reading of 3.2%, it remains within the anticipated range. Furthermore, the monthly CPI readings experienced a modest increase of 0.1%, surpassing the projected value of 0%.
- The Consumer Price Index (CPI), excluding food and energy, commonly called the core CPI, remained unchanged at a steady rate of 4%. On a month-over-month basis, it recorded a growth of 0.3%, in line with market predictions and slightly higher than the previous month’s figure of 0.2% observed in October.
- With the release of inflation data and the notable improvement in the US labor market, the Federal Reserve’s interest rate projections for the upcoming year continue to exhibit volatility. Based on the latest data from the esteemed Chicago Board of Trade (CBOT), astute traders are anticipating a substantial reduction of 100 basis points (bps) in interest rates.
- On the upcoming Wednesday, forex traders involved in the USD/MXN currency pair will meticulously analyze the statement the Federal Reserve released, its Summary of Economic Projections (SEP), and the speech by Chair Jerome Powell. Powell anticipates counteracting market conjecture regarding the potential easing of monetary policy in the upcoming year.
- The US Dollar Index (DXY) experienced a slight reduction in its losses, as the DXY declined by 0.07% to reach 104.01.
The Value of the Mexican Peso Rises and Hits a Two-Day High Around 17.29
The daily chart of USD/MXN depicts a neutral to upward bias as market participants struggle around the 100-day Simple Moving Average (SMA) situated at 17.40, which is perceived as a significant resistance level. To reestablish dominance, initiating a breach of the level above is imperative, subsequently targeting the considerable threshold of 17.50.
Potential bullish factors may come into play as the price approaches the 200-day Simple Moving Average (SMA) level of 17.54. Subsequently, further upside momentum could materialize upon reaching the 50-day SMA level of 17.65.
In contrast, the inability to regain control over the 100-day Simple Moving Average (SMA) may attract an influx of sellers, resulting in a downward pressure on prices towards the 17.20 level. Subsequently, a robust demand zone is anticipated within the 17.00/05 range. Upon surpassing the barrier above, the USD/MXN currency pair may endeavor to challenge the year-to-date (YTD) low of 16.62.