The Mexican peso (MXN) continued its winning streak on Thursday, gaining against the US dollar (USD) after the Federal Reserve’s decision to cut interest rates by 25 basis points. The USD/MXN exchange rate dropped below 20.00, with a current trading price of 19.78, down 1.42%.
The Fed’s statement highlighted a solid economy despite a slight easing in the job market. However, inflation remains elevated, and officials acknowledged that achieving their dual mandate is “roughly in balance.” The committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities.
Mexican data also provided mixed signals. Headline inflation rose above estimates in October, but core inflation dipped, potentially paving the way for further easing by the Bank of Mexico (Banxico). Additionally, the Supreme Court dismissed a challenge to the judicial reform bill, easing Mexico’s political tensions.
Meanwhile, US economic data was mixed. The number of Americans applying for unemployment benefits rose above the prior week’s report, as expected. However, the US economy remains strong, with officials citing progress toward their 2% inflation goal.
Market Movers:
* USD/MXN will likely remain volatile after the US elections, with traders keeping a close eye on President-elect Donald Trump’s rhetoric and tweets.
* Mexico’s October inflation rose to 4.76% YoY, exceeding estimates of 4.72%. Core inflation dipped to 3.80% YoY, below forecasts of 3.85%.
* Automobile exports rose from 4.8% to 5% YoY, while production dropped from 11.7% to 1.1%, hinting at the ongoing deceleration in the manufacturing sector.
* The US Initial Jobless Claims for the week ending November 2 increased from 218K to 221K as widely expected.
USD/MXN Technical Outlook:
The USD/MXN uptrend remains intact, with the pair trimming its November 6 gains. Sellers need to push the exchange rate below 19.76 to expose the 50-day Simple Moving Average (SMA) at 19.68. On the upside, a breach of 20.00 will expose the August 5 high at 20.22 and the two-year high at 20.80.
Source: FX Street
