- Mexican peso holds to recent gains on expectations about the new trade deal.
- US Dollar corrects lower across the board on a quiet Monday for markets.
The Mexican peso rose against the US dollar on Monday, on the back of a correction of the greenback across the board. At the same time, the Peso continues to show strength after last week positive events regarding trade.
The US agreed to remove steal and aluminum tariffs to Mexico and Canada, increasing expectations about the ratification of the new trade deal that would replace NAFTA.
The reports boosted on Friday the Mexican peso and the Canadian dollar. The USD/MXN dropped from levels on top of 19.20 and today it continued to decline. Recently bottomed at 19.05, the lowest since Thursday.
As of writing, stands at 19.07, consolidating daily losses and near the 19.00/05 key support area (horizontal level, uptrend line and 20-day moving average). A daily close below the mentioned level would point to further losses, targeting 18.90. On the upside, short-term resistance levels might now be seen at 19.15 and 19.20
Later today, Fed’s Powell will deliver a speech but there are no expectations that could impact markets. The next risk event is the release of the FOMC minutes on Wednesday.
In Mexico, the critical economic number will come out on Thursday: the mid-month CPI for May. “Is expected to rise 4.48% y/y vs. 4.38% in mid-April. Banco de Mexico just delivered a hawkish hold, giving no inkling of a potential rate cut. We think high inflation and a weak peso will likely prevent any easing until 2020. April trade and Q1 current account data will be reported Friday. Next policy meeting is June 27, no change is expected then,” wrote Win Thin, global head of currency strategy at Brown Brothers Harriman.