USDMXN: Peso Stumbles After U.S. Inflation Figures
USDMXN was higher by 0.50% after Inflation figures from the U.S. economy came in as expected at 1.4%. The number was higher than last month’s 1.3% and keeps inflation on the FED radar.
The pair has stumbled since the end of September after the return of U.S stimulus talks. These were at a stalemate, but the market now expects to see a new deal, close to the $2 trillion mark either before, or after, the November 3rd election.
One of the highlights of the Mexican economy in recent months has been PMI strength, with the figure hitting a six-month high in the recent month and creeping back into the mid-40s. Manufacturing was touching the expansionary 50 figure before the virus rocked the economy.
The Peso has also found buyers with a rising inflation rate, which may lead to action by the country’s central bank. Interest rates were at 8% for most of 2019, but have since been slashed to 4.25%. Inflation is now running at 4% and this is higher than it was in 2019. Mexico saw its GDP slump to -18.7% in the second quarter but if this picks up again then inflation could continue higher, forcing the bank to act.
USDMXN Technical Outlook
USDMXN is testing resistance at 21.25. A bullish close could see further gains towards the 21.80 figure. If it struggles to get there drops lower, then the downtrend should continue and target the 20.85 lows from mid-September. Short traders would look for that level to break lower into the 20s.