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MXN rebounds to around 20.30 as US-Canada trade tensions ease
As the US-Canada trade situation eased, market sentiment rebounded and the Mexican peso rebounded to around 20.30 against the US dollar. Despite an increase in US job vacancies, the market is taking a wait-and-see attitude towards the upcoming CPI data.
The Mexican peso (MXN) has appreciated recently, mainly due to the weakening of the US dollar and the easing of the US-Canada trade situation. The U.S. dollar index (DXY) hit a new low for the year, further supporting the rebound of the Mexican peso. The USD/MXN exchange rate fell to 20.25 at one point, a drop of 0.50%.
Previously, the trade relations between the two countries were tense due to the United States imposing additional tariffs on Canadian aluminum and steel products, which affected market sentiment. The Trump administration has imposed an additional 25% import tariff on Canadian aluminum and steel products, further escalating trade relations between the two countries. However, the news did not put significant pressure on the Mexican peso, which still traded below its 100-day simple moving average (SMA) of 20.34.
Currently, there is a lack of economic data from Mexico, and the market is focusing on the upcoming total demand data for the fourth quarter of 2024. In the United States, the number of job openings rose according to the latest data from the Bureau of Labor Statistics (BLS), showing that risks remain in the market due to uncertainty about tariffs and government spending cuts.
Despite these positive data for the dollar, the U.S. Dollar Index (DXY) still fell, hitting 103.30, its lowest level this year, down 0.55%.
This week, the United States will release important CPI data, which will provide key guidance for the Federal Reserve's monetary policy decisions. Currently, the market expects the Fed to ease by 83.5 basis points by the end of the year.
Market Update: Mexican peso remains stable, hovering around 20.30
Consumer confidence in Mexico is showing signs of growth despite recent upward pressure on inflation and core prices, while persistent inflationary pressures have also prompted expectations that the Bank of Mexico (Banxico) may cut interest rates at its March 27 meeting.
The latest data from the US Job Openings and Labor Turnover Survey (JOLTS) showed that the number of job openings increased from 7.508 million to 7.74 million in January, exceeding market expectations. According to a Reuters poll, 70 of 74 economists believe the risk of recession is rising in the United States, Canada and Mexico.
Behind the U.S.-Mexico trade dispute, if the two countries can reach an agreement, it will pave the way for further appreciation of the Mexican peso. If no consensus is reached, another rally in USD/MXN could occur as US tariffs could cause further shocks to the Mexican economy.
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