- The Mexican Peso is facing resistance against the Greenback as the US economy remains strong.
- The OECD predicts a slowdown in Mexico’s economy due to the cooling US economy impacting Mexican exports.
- Fed Waller’s comments are limiting the USD/MXN advance as traders anticipate rate cuts from the Fed in 2024.
In early Wednesday trading, the Mexican Peso (MXN) experienced a sharp decline against the US Dollar (USD) after the US Department of Commerce reported that the US economy is growing above trend. As a result, the USD/MXN bounced off its daily lows and is currently trading near the weekly highs at 17.21, up 0.40% on the day.
Mexico’s economic calendar is relatively light, with October’s unemployment rate expected to be 2.8%, slightly lower than in September. Meanwhile, the OECD released its 2024 economic outlook for Mexico, forecasting slower growth at 2.5%, down from 3.4% in 2023, due to the moderation of the US economy impacting Mexico’s exports. The OECD also suggests that the Bank of Mexico (Banxico) should maintain a restrictive monetary policy as inflation is expected to decline in 2024 and 2025.
Over in the US, the economy grew faster than expected, according to the US Bureau of Economic Analysis (BEA), leading to an increase in the US Dollar Index (DXY) to 102.95, which is weighing on the USD/MXN.
Recent comments from US Federal Reserve officials have also impacted the currency market. Atlanta’s Fed President Raphael Bostic mentioned slower growth and falling inflation, while Richmond’s Fed President Thomas Barkin expressed skepticism about inflation reaching the Fed’s goal.
Daily movers: The Mexican Peso weakens as the USD/MXN rises to 17.15 following US data
- US Gross Domestic Product (GDP) for Q3 exceeded estimates, rising by 5.2% QoQ.
- The US Advancement Goods Trade Balance saw a deficit of $89.8 billion in October, widening from $86.3 billion in September.
- Fed Governor Christopher Waller suggested the possibility of rate cuts if inflation continues to fall.
- Traders are expecting 115 basis points of rate cuts by the US central bank in 2024.
- Deputy Governor Jonathan Heath of Banxico commented on the need for rate cuts next year, but with caution.
