The Mexican Peso (MXN) has gained value against its major counterparts, supported by a weaker US Dollar (USD) and the European Central Bank’s (ECB) rate cut. The expectation of lower interest rates in Europe and the US has weighed on the USD, EUR, and GBP.
US Dollar Weakness
The US Dollar has weakened due to increased speculation for a larger-than-expected rate cut by the Federal Reserve (Fed) at its upcoming meeting. This follows comments from former New York Fed President William Dudley and media reports.
ECB Rate Cut
The ECB cut interest rates by 25 basis points (bps) as expected, but the accompanying statement suggested a potential for further rate cuts. This, along with the downward revision to ECB economic growth forecasts, has weakened the Euro (EUR).
Economic Data
Eurozone Industrial Production decreased by 2.2% year-over-year (YoY) in July, which was better than expected. The Michigan Consumer Sentiment Index for September is expected to remain steady.
Mexican Peso Outlook
The Mexican Peso remains relatively strong despite concerns about the recent judicial reforms. The currency is benefiting from nearshoring trends and reduced political risk.
Technical Analysis
The USD/MXN pair has broken out of a rising mini-channel, suggesting a potential downtrend. The next support level is 19.01, followed by the 50-day Simple Moving Average (SMA). However, the medium and long-term trends remain bullish, indicating a potential recovery.
