Mexican Peso awaits US Consumer Confidence data for its next move
- The Mexican Peso is cautious after US Durable Goods declined less than expected.
- Kashkari’s hawkish tone highlights the uncertainty in trade, supporting the central bank’s decision to keep interest rates steady.
- USD/MXN remains in a broader downtrend with resistance firming at 19.29.
The Mexican Peso (MXN) is holding firm against the US Dollar (USD) on Tuesday, with USD/MXN hovering near the 19.20 support zone at the time of writing.
Although the Greenback is attempting a mild recovery, momentum remains subdued, with price capped below the descending trendline of the April decline and the 10-day Simple Moving Average at 19.33.
Liquidity has returned following the Memorial Day holiday, prompting a temporary pause in the US bond market sell-off. However, the Peso continues to benefit from resilient risk appetite and stable domestic fundamentals.
US demand and sentiment indicators in focus ahead of key policy signals
US Durable Goods Orders for April, released at 12:30 GMT, came in at -6.3% for April, a sharp decrease from March’s 7.6% reading.
While the negative print highlights a slowdown in manufacturing demand, the reading was better than market expectations of a 7.9% contraction, tempering concerns about a steeper downturn.
The indicator tracks new orders placed with US manufacturers for long-lasting goods — typically those expected to last three years or more — and serves as a key gauge of industrial activity and business investment.
Later in the day, at 14:00 GMT, the US Conference Board will release its Consumer Confidence Index for May.
The upcoming data will offer further insight into the sentiment of US households amid intensifying fiscal challenges, elevated interest rates, and ongoing geopolitical risks.
Fed’s Kashkari urges patience, highlighting uncertainty from economic shocks
Neel Kashkari, President of the Federal Reserve (Fed) Bank of Minneapolis, provided a temporary boost in confidence this Tuesday. When speaking at the Tokyo summit, where bankers, policymakers, and economists gathered to discuss monetary policy, he maintained a hawkish tone.
To conclude his speech, Kashkari stated that “Massive shocks create uncertainty for policymakers, both in understanding the underlying dynamics of the shocks themselves and, for some shocks, in determining the appropriate policy response. In such moments, taking time to get more information to help inform the collective judgments of policymakers may be the best of an imperfect set of options,” the official site of the Federal Reserve Bank of Minneapolis reports.
These comments reiterate the Fed’s narrative that interest rates will likely remain at current levels until the impact of US President Trump’s tariffs on the economy becomes clearer.
Mexican Peso daily digest: US Consumer Confidence threatens USD/MXN
- With the Fed reiterating its ‘data-dependent’ stance, US Durable Goods Orders provided a mixed signal regarding the strength of US industrial activity.
- After a significant decline in Consumer Confidence to 86.0 in April, markets are seeking the latest data for insights on how US households are reacting to increased fiscal uncertainty and global geopolitical tensions.
- On Wednesday, the minutes from May’s Federal Reserve Open Markets Committee (FOMC) meeting will provide additional insight into the central bank’s decision to maintain interest rates at current levels and the potential trajectory of monetary policy in the near term.
- Market participants are awaiting the release of the Fed’s preferred inflation measure, which is the US core Personal Consumption Expenditures (PCE) data for April, as well as the University of Michigan Consumer Sentiment figures, both scheduled for release on Friday.
- These data points are crucial for understanding inflation and consumer sentiment, as they gauge US citizens’ feelings about the current economic situation. Both factors influence expectations regarding when the Federal Reserve (Fed) might consider cutting interest rates.
Mexican Peso technical analysis: USD/MXN shifts lower after a rejection of trendline resistance
USD/MXN continues to trade within a downward trend, with prices capped beneath the 10-day Simple Moving Average (SMA) at 19.33.
After hitting a new YTD low below 19.20 on Monday, a modest rebound in the US Dollar has pushed the pair to trendline resistance from the April decline at 19.29.
Momentum indicators remain weak, with the Relative Strength Index (RSI) flattening at 36.47, indicating that while bearish momentum is present, the market is not yet in oversold territory.
With the downtrend currently intact, a break below 19.20 could draw attention to the October low at 19.11, which serves as the next significant support level.
A sustained break below this level could open the door to deeper declines toward 19.00, while any rebound would first need to reclaim 19.47 to shift short-term sentiment.
USD/MXN daily chart
Mexican Peso FAQs
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.