- The Mexican Peso gains 0.59% against the U.S. Dollar, on track for a strong weekly performance.
- Banxico’s latest minutes indicate the possibility of a 50 bps rate cut in December, supporting the Peso’s positive outlook.
- President Sheinbaum expressed confidence in avoiding Trump’s proposed 25% tariffs, enhancing MXN stability.
The Mexican Peso strengthened against the U.S. Dollar during Friday’s North American session, with USD/MXN falling 0.59% to 20.29. The U.S. Dollar continued its decline, heading for its largest weekly loss in three months amid speculation that President-elect Donald Trump may soften his trade rhetoric, weighing on the Greenback.
Mexico’s economic calendar was light, but Banxico released minutes from its November 14 monetary policy meeting on Thursday. The board unanimously voted to continue cutting rates, with one member advocating for a larger adjustment in December due to expectations of easing core inflation.
The Peso received further support after a conversation between Mexican President Claudia Sheinbaum and President-elect Trump on Wednesday calmed market fears. President Sheinbaum expressed optimism about reaching a deal to avert Trump’s proposed 25% tariffs, emphasizing respect for Mexican sovereignty and collaboration between both governments.
Meanwhile, U.S. economic data showed signs of a slowdown, with the Chicago PMI for November posting a second consecutive monthly decline, adding to concerns about the pace of economic growth.
Daily Digest Market Movers
- Banxico noted heightened volatility in the Peso due to U.S. election uncertainty but emphasized that inflation risks remain tilted to the upside.
- The central bank’s quarterly report revised Mexico’s 2024 GDP growth projection to 1.8% from 1.5%, while maintaining the 2025 forecast at 1.2%.
- Banxico Governor Victoria Rodriguez stated there has been no need for forex market intervention despite recent Peso fluctuations.
- The CME FedWatch Tool indicates a 66% probability of a 25 bps Fed rate cut in December, up from 59% the previous day, with December Fed funds futures pointing to 24 bps of easing by year-end 2024.
Technical Outlook: USD/MXN Declines Below 20.40
Despite USD/MXN trending lower, the pair remains upwardly biased with higher highs and lows. Holding above the November 19 swing low of 20.06 could lead to further gains, with resistance at 20.50, followed by the YTD high of 20.82, and then 21.00.
On the downside, a break below 20.06 would target support at 20.00, with additional pressure likely to test the 50-day SMA at 19.92. Below that, key support levels include the 100-day SMA at 19.48 and the psychological 19.00 level.
