Declining Mexican Peso Struggles Against Rising US Dollar Amidst Soaring Inflation

• Mexican Peso takes a hit and sees losses as the USD/MXN hovers close to the 100-day Simple Moving Average (SMA).
• Inflation in Mexico rises in November, potentially delaying Banxico’s plans to ease policy.
• US labor market data cools down, leaving USD/MXN traders watching US Nonfarm Payrolls.

The Mexican Peso (MXN) is sharply dropping against the US Dollar (USD) in Thursday’s New York session. Economic data from Mexico suggests that the Bank of Mexico (Banxico) may need to keep interest rates higher for longer, potentially keeping the USD/MXN trading below the 18.00 figure. At the moment, the exotic pair is trading at 17.42, marking a gain of 0.81%.

Mexico’s National Statistics Agency (INEGI) reported a rise in inflation in November, while core readings dipped. The rise in US Treasury bond yields has underpinned the USD/MXN. However, the Greenback (USD) remains weak, with the US Dollar Index (DXY) down 0.49% at 103.65.

Daily Digest Market Movers: Mexican Peso on the Backfoot Despite Rising Inflation in Mexico

• Mexico’s Consumer Price Index (CPI) in November rose 4.32% YoY, surpassing September’s 4.26%, though still below the forecast of 4.40%. The Core CPI, typically used by central banks as a more stable measure, eased from 5.5% to 5.30% in the twelve months to November, below forecasts of 5.34%.
• Recent interviews with Banxico’s officials suggest differing opinions on easing policy based on the disinflation process.
• In the US, recently released data indicates a cooling labor market, with increases in job cuts and initial jobless claims.

Technical Analysis: Mexican Peso Weakens Against the US Dollar

The USD/MXN struggles around the 100-day SMA at 17.38, with potential resistance at the psychological 17.50 figure. If buyers reclaim this level, the 200-day SMA at 17.55 and the 50-day SMA at 17.67 will come into play.

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