Mexican Peso Surges on Strong Inflation Data, Diminishing Rate Cut Prospects

The Mexican Peso (MXN) strengthened across major currency pairs on Tuesday, fueled by higher-than-expected inflation data and the persistent allure of its high interest rates.

June’s headline inflation exceeded forecasts, coming in at 0.38% month-on-month, while core inflation, excluding volatile food and energy components, reached 0.22%. The 12-month inflation rate also surpassed expectations at 4.98%.

This surge in inflation further solidifies the Mexican central bank’s (Banxico) hawkish stance, making near-term interest rate cuts less likely. With a benchmark rate of 11.00%, the Peso remains attractive to foreign investors seeking higher yields.

USD/MXN Technical Outlook: Bearish Bias Prevails

The USD/MXN pair continued its decline, approaching the critical support level of 17.87, established on June 24th. A decisive break below this level could trigger further downside momentum, targeting the 50-day Simple Moving Average (SMA) at 17.50.

While a potential sideways consolidation between 17.87 and 18.50 cannot be ruled out, the current short-term trend remains bearish.

Key Points:

  • Mexican Peso rallies on strong inflation data
  • Rate cut prospects diminish, boosting MXN appeal
  • USD/MXN approaches critical support level
  • Short-term bearish bias persists