USD/MXN aims to extend rally above 18.20 as focus shifts to US GDP

• USD/MXN is looking to extend its rally above 18.20 despite the further correction in the USD Index.
• Scrutiny of the US Durable Goods Orders data shows that the majority of orders were for commercial aircraft.
• The annualized US GDP data is expected to land lower at 2.0% from the former release of 2.6%.

The USD/MXN pair is hovering near a two-week high of 18.19 in the Asian session. The major is showing strength despite further correction in the US Dollar Index (DXY). The USD Index has extended its correction to near 101.35 as investors’ risk appetite is displaying some recovery.

S&P500 futures have added some decent gains in the Asian session. US equities were a mixed bag on Wednesday as technology stocks outperformance other sectors. Upbeat earnings from Microsoft and Mea platforms strengthened NASDAQ while weak earnings performance from the manufacturing and capital goods sector capped the upside of the S&P500.

Blame from the First Republic Bank on the US government for being reluctant in providing liquidity support despite knowing about declining deposits impacted the confidence of consumers.

Poor demand for S&P500 companies due to overall weak quarterly performance strengthened the appeal for the USD Index. The US Dollar showed a V-shape recovery from 101.00 after upbeat Durable Goods Orders data. However, scrutiny of the economic data shows that the majority of orders were for commercial aircraft and what matters most is the demand for core capital goods which remained weak. It seems that firms have postponed their expansion plans due to higher interest rates from the Federal Reserve (Fed).

Going forward, the release of the US Gross Domestic Product (GDP) (Q1) data will remain in the spotlight. As per the consensus, the annualized GDP data is expected to land lower at 2.0% from the former release of 2.6%.

On the Mexican Peso front, investors are awaiting the release of the Trade Balance data. Upbeat economic data would improve the appeal for the Mexican Peso.