Mexican Peso gives back gains as US data boosts the US Dollar

• Mexican Peso reverses its course, weakens against the US Dollar, losing more than 0.40%
• Mexico’s CPI for October’s first half eases as Banxico has held rates unchanged since March 2023.
• US business activity improves, exiting contractionary territory as per S&P Global PMIs.

Mexican Peso (MXN) gave up some of its Monday’s gains against the US Dollar (USD) after data from the United States (US) boosted the Greenback (USD).Additionally, US Treasury bond yields jumped, even though there is growing consensus amongst investors that the US Federal Reserve (Fed) will keep rates unchanged once again when it meets on November 1. Therefore, the emerging market currency is on the defensive as the USD/MXN is trading at 18.22, up 0.49% on the day.

Mexico reported inflation data before Wall Street opened, with the Consumer Price Index (CPI) rate for the first half of October continuing to ease. That is welcomed news, as the Bank of Mexico (Banxico) has held rates at 11.25% since March 2023, though market players expect the first rate cut in 2024. Aside from this, data from the United States showed that business activity, as revealed by S&P Global PMIs, bounced from the contractionary territory, with most indicators expanding above the contraction/expansion 50 threshold.

Daily Digest Market Movers: Mexican Peso surrenders Monday’s gains, USD/MXN back above 18.20

• Mexico's National Statistics Agency INEGI reported annual headline inflation hit 4.27%, down from 4.45% at the end of September, below forecasts of 4.38%.
• Mexico’s core inflation rate YoY was 5.54%, beneath forecasts of 5.6%.
• US S&P Global Manufacturing PMI for October jumped to 50, exceeding forecasts of 49.5, while the Services PMI exceeded the contractionary consensus of 49.9, reaching  50.9.
• US S&P Global Composite PMI was 51, above the prior 50.2.
• The Overall Index of Economic Activity in Mexico grew by 0.4% in August, exceeding the estimated 0.3%, data showed on Monday.
• Annually based, the Mexican economic activity expanded by 3.7%, smashing forecasts of 3.4%.
• The Bank of Mexico (Banxico) held rates at 11.25% in September and revised its inflation projections from 3.50% to 3.87% for 2024, above the central bank’s 3.00% target (plus or minus 1%).

Technical Analysis: Mexican Peso loses steam as USD/MXN buyers re-enter the market

The USD/MXN is upward biased, and price action of the last couple of days could form a ‘bullish-harami’ candlestick chart pattern on the daily chart, a bullish pattern. The USD/MXN pair's first resistance would be the October 23 high at 18.37 before buyers lift the spot price to last week’s high at 18.46, before challenging 18.48, October’s high. Once those levels are cleared, the 18.50 figure would be up for grabs. On the flip side, the USD/MXN must drop below the 18.00 psychological figure for sellers to reclaim the 200-day Simple Moving Average (SMA) at 17.73.