The Mexican Peso reached fresh 24-month highs against the US Dollar, with USD/MXN briefly dropping below the 17.00 level to a daily low of 16.97 before rebounding to 17.02 on Friday [1]. This move was driven by weaker-than-expected US economic data, including a 0.6% month-over-month contraction in Retail Sales, which missed forecasts of a 0.1% expansion and was lower than June’s 0.2% growth [1]. Additionally, the University of Michigan Consumer Sentiment Index for August fell from 55.2 to 51, indicating deteriorating sentiment among American households, while inflation expectations remained largely unchanged [1].
The softer US data led traders to aggressively price out the likelihood of further Federal Reserve rate hikes, with current odds for a September hike at 32% and a 68% probability of rates remaining steady [1]. This shift in expectations contributed to the pressure on the US Dollar and supported the Peso’s strength [1].
In Mexico, Economy Secretary Marcelo Ebrard called for the US to eliminate or reduce tariffs on the automobile industry, highlighting that vehicles from Japan, South Korea, Germany, or Morocco face a 15% tariff, while those from Mexico are subject to a 25% tariff. Ebrard argued for a discount, citing Mexico’s higher purchases of US parts compared to other countries [1].
Looking ahead, investors are focused on the upcoming release of the Bank of Mexico’s (Banxico) meeting minutes and Retail Sales data, which are expected to provide further direction for the Peso. In the US, key data releases next week include housing data, the ADP Employment Change 4-week average, jobless claims, and Flash PMIs [1].
From a technical perspective, USD/MXN remains under bearish pressure, trading below key moving averages and resistance levels. The Relative Strength Index (RSI) is around 27, indicating oversold conditions, but the bearish trend is expected to persist unless the pair reclaims resistance near 17.3775 and 17.4197. The next significant support is at 15.6176 if the decline continues [1].
CONCLUSION
The Mexican Peso’s rally to multi-month highs was fueled by disappointing US economic data and a shift in Fed rate hike expectations. Market participants are now closely watching upcoming Banxico minutes and economic releases for further direction, while technical indicators suggest continued bearish pressure on USD/MXN unless key resistance levels are breached.