Market Data 
- The Mexican Peso picks up from lows as the US Dollar pulls back ahead of US PCE inflation.
- The MXN bounced up on Thursday after Banxico confirmed expectations and cut interest rates by 25 bps.
- USD/MXN gives away gains and approaches the key 20.00 support area again.
The Mexican Peso (MXN) is trading on a stronger note against the US Dollar (USD) on Friday, regaining some of the ground lost following a ”hawkish cut” by the Federal Reserve (Fed) on Wednesday, and returning to the previous trading range, below 20.30.
The Peso bounced up from two-week lows on Thursday after the Bank of Mexico (Banxico) confirmed investors’ expectations and cut rates by 25 basis points (bps) to close the year at 10%.
The central bank’s statement warns about the negative impact of higher tariffs in the US and observes that the labour market loosened. Inflation has cooled and is expected to continue that way, which will allow the bank to ease its monetary policy further next year.
Today, the focus is on the US Personal Consumption Expenditures (PCE) Prices Index, which is expected to confirm that inflation remains sticky at levels above the Fed’s 2% rate. An upside surprise today would cast further doubt on the Fed’s easing cycle and provide additional support for the US Dollar.
A mild US Dollar pullback is providing support to the MXN
- The Mexican Peso is picking up as the U Dollar Index (DXY) retreats moderately after having rallied about 1.5% this week.
- In the US on Thursday, the third quarter’s Gross Domestic Product was revised higher to a 3.1% annualized growth from the previously estimated 2.8% increase.
- Beyond that, data from the Labor Department revealed that Jobless Claims grew by 220K in the week of November 13, well below the 230K expected and a 242K increase in the previous week.
- The Bank of Mexico’s inflation forecasts reveal that the country’s Consumer Prices Index (CPI) will end the year at 4.6%, down from previous estimations of 4.7%, but will not converge with the central bank’s target until the second half of 2026.
- Later today, the US PCE Prices Index is expected to show a steady 0.2% monthly increase in November, with the yearly rate up to 2.5% from 2.3% in October.
- The core PCE, considered more relevant for monetary policy purposes, is seen slowing down to 0.2% from 0.3% on month and accelerating to 2.9% on year from 2.8% in October.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
USD EUR GBP JPY CAD AUD NZD CHF USD -0.13% 0.04% -0.38% -0.03% 0.25% 0.12% -0.33% EUR 0.13% 0.17% -0.20% 0.13% 0.40% 0.25% -0.20% GBP -0.04% -0.17% -0.37% -0.07% 0.20% 0.08% -0.37% JPY 0.38% 0.20% 0.37% 0.33% 0.60% 0.46% 0.03% CAD 0.03% -0.13% 0.07% -0.33% 0.27% 0.15% -0.30% AUD -0.25% -0.40% -0.20% -0.60% -0.27% -0.14% -0.57% NZD -0.12% -0.25% -0.08% -0.46% -0.15% 0.14% -0.44% CHF 0.33% 0.20% 0.37% -0.03% 0.30% 0.57% 0.44% The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Mexican Peso technical outlook: USD/MXN returns below 20.30 and approaches key support at 20.00
The USD/MXN recovery has been capped at 20.50 and the pair is gaining bearish traction ahead of the US PCE Pricesd Index release, with price action falling below 20.30 and approaching a key supporter area at 20.00.
Technical indicators suggest that bears are gaining control with the Relative Strength Index (RSI) falling below 50 in the 4-hour chart. On the downside, the next target is the mentioned 20.00 level (November 19 and December 16 lows) and then 19.75 (October 22 and 24 and November 7 and 8 lows). Resistances are at Thursday’s high of 20.50, ahead of the November 6 and 26 highs at 20.80.
USD/MXN 4-Hour Chart
Inflation FAQs
Inflation measures the rise in the price of a representative basket of goods and services. Headline inflation is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core inflation excludes more volatile elements such as food and fuel which can fluctuate because of geopolitical and seasonal factors. Core inflation is the figure economists focus on and is the level targeted by central banks, which are mandated to keep inflation at a manageable level, usually around 2%.
The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs. When Core CPI rises above 2% it usually results in higher interest rates and vice versa when it falls below 2%. Since higher interest rates are positive for a currency, higher inflation usually results in a stronger currency. The opposite is true when inflation falls.
Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.
Formerly, Gold was the asset investors turned to in times of high inflation because it preserved its value, and whilst investors will often still buy Gold for its safe-haven properties in times of extreme market turmoil, this is not the case most of the time. This is because when inflation is high, central banks will put up interest rates to combat it. Higher interest rates are negative for Gold because they increase the opportunity-cost of holding Gold vis-a-vis an interest-bearing asset or placing the money in a cash deposit account. On the flipside, lower inflation tends to be positive for Gold as it brings interest rates down, making the bright metal a more viable investment alternative.
