The Mexican Peso (MXN) weakened against the US Dollar (USD) on Tuesday as investors positioned themselves ahead of the US Federal Reserve’s (Fed) monetary policy decision on Wednesday. Despite mixed economic data from the US, market sentiment was dominated by former President Donald Trump’s trade rhetoric, adding to investor uncertainty. As a result, USD/MXN edged up 0.14%, trading around 19.94.
Cautious Market Sentiment Ahead of Fed Projections
Investors adopted a risk-averse stance, booking profits ahead of the Fed’s meeting. The central bank is widely expected to keep interest rates unchanged, but traders will scrutinize the Summary of Economic Projections (SEP) for clues on whether policymakers lean toward a dovish or hawkish stance regarding future rate cuts.
US economic data released earlier in the day presented a mixed picture. Industrial Production climbed 0.7% month-over-month in February, surpassing forecasts of 0.2%, while housing data showed building permits declined 1.2% to 1.456 million, even as housing starts surged 11.2% to 1.501 million. Despite these figures, trade policy uncertainty remained a dominant market driver.
Mexico’s Economic Outlook Faces Pressure
In Mexico, economic concerns persist as the Instituto Nacional de Estadística Geografía e Informatica (INEGI) prepares to release Aggregate Demand and Private Spending data on Wednesday and Thursday. These reports are expected to shed light on the extent of the country’s economic slowdown, just a week before the Banco de México (Banxico) convenes for its March 27 policy meeting.
The Organization for Economic Cooperation and Development (OECD) has warned that Trump’s proposed tariffs on Mexican goods could push Mexico into recession. The OECD’s revised forecasts project that if 25% tariffs are implemented on most exports starting in April, Mexico’s economy could contract by 1.3% in 2025 and shrink by 0.6% next year.
Adding to concerns, Mexican Finance Minister Edgar Amador Zamora noted last week that while the national economy is still expanding, signs of a slowdown are emerging due to trade tensions with the US.
USD/MXN Technical Outlook: Peso Under Pressure
The USD/MXN pair posted modest gains but remained below the key 20.00 psychological level, signaling limited upside momentum. Price action formed a ‘gravestone doji’ pattern, suggesting bearish pressure, while the Relative Strength Index (RSI) remains in negative territory, indicating that sellers are still in control.
A drop below 19.90 could accelerate losses, with the next major support at the 200-day Simple Moving Average (SMA) at 19.65. Further declines could test key levels at 19.50, 19.00, and the August 2024 low of 18.64.
Conversely, a decisive move above 20.00 could open the door for a rally toward the 100-day SMA at 20.35.
As markets navigate uncertainty over US monetary policy and trade risks, the Mexican Peso remains vulnerable to further volatility in the days ahead.
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