- The Mexican Peso has slipped as broader markets focus on US data.
- Notable lack of Mexico data on the docket for this week.
- Markets are set to hinge on US labor, output figures ahead of NFP Friday.
The Mexican Peso (MXN) is taking a breather, retreating from a 17-week high against the US Dollar (USD) as markets kick off the new trading year focusing on US labor and output data.
Economic data from Mexico is absent from the calendar for this week, and the USD is set to be the primary driver to usher in 2024. The Greenback is rebounding in early trading as money markets ease back on bets of Federal Reserve (Fed) rate cuts, with the US Dollar reclaiming around a full percent against the Peso.
Daily digest market movers: Mexican Peso gives back recent gains as investors look to US NFP
- The US Dollar is climbing across the board to kick off the new year’s inaugural trading week.
- Money markets have eased back their bets of Fed rate cuts, still see up to 150 basis points in rate cuts through 2024.
- US output continues to fall, S&P Global Manufacturing Purchasing Managers’ Index (PMI) for December declined to 47.9, a four-month low. Median market forecast expected a steady print at November’s 48.2.
- US Construction Spending also missed the mark, slipping from October’s 1.2% (revised up from 0.6%) to print at 0.4% in November, missing the forecast of 0.5%.
- Wednesday brings the US ISM Manufacturing PMI, as well as the latest round of the Fed’s Meeting Minutes.
- Thursday sees the December print of the ADP Employment Change, but the figure has become notoriously inconsistent lately, poorly forecasting the release of Friday’s US Nonfarm Payrolls, alongside US Average Earnings and the ISM Services PMI.
US Dollar price this week
The table below shows the percentage change of US Dollar (USD) against listed major currencies this week. US Dollar was the strongest against the New Zealand Dollar.
USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
USD | 0.99% | 0.90% | 0.49% | 0.71% | 0.64% | 0.99% | 0.93% | |
EUR | -0.84% | 0.08% | -0.35% | -0.12% | -0.36% | 0.16% | 0.04% | |
GBP | -0.92% | -0.08% | -0.41% | -0.20% | -0.20% | 0.08% | -0.05% | |
CAD | -0.49% | 0.32% | 0.59% | 0.21% | 0.13% | 0.49% | 0.39% | |
AUD | -0.70% | 0.11% | 0.22% | -0.22% | -0.25% | 0.29% | 0.19% | |
JPY | -0.63% | 0.37% | 0.33% | 0.05% | 0.26% | 0.52% | 0.19% | |
NZD | -1.00% | -0.14% | -0.08% | -0.49% | -0.28% | -0.54% | -0.11% | |
CHF | -0.87% | -0.02% | 0.06% | -0.35% | -0.15% | -0.24% | 0.13% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Technical Analysis: Mexican Peso fades top side, eases back as US Dollar rebounds
The Mexican Peso (MXN) is slipping back from near-term highs, getting pushed back down as market pivot into Greenback bets. The USD/MXN has rebounded above the 200-hour Simple Moving Average (SMA), climbing back over the 17.00 level following last week’s decline to a multi-month low of 16.86.
Bullish momentum in the US Dollar still faces a long climb upwards, with long-term technical resistance sitting at the bearish crossover of the 50-day and 200-day SMAs just south of 17.50. On the low side, a break below 2023’s lows of 16.62 will see the USD/MXN breaking into its lowest bids since 2016.
USD/MXN Hourly Chart
USD/MXN Daily Chart
Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2%.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2% it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75%-5.00%, though the upper limit (in that case 5.00%) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
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