Puerto Vallarta, Mexico – The Mexican Peso exchange rate with the US Dollar began Wednesday’s session around 19.73 but experienced significant gains throughout the morning, reaching a new six-week high at 20.10. The movement is driven by the continued momentum of the US Dollar, coupled with disappointing Mexican retail sales data. This development has raised market concerns, adding further volatility to the foreign exchange market.
Strength of the US Dollar
The US Dollar has continued to strengthen, supported by rising US Treasury yields. The US Dollar Index (DXY), which tracks the performance of the greenback against a basket of major currencies, has increased for the third consecutive day, hitting a three-month high of 104.57. This rise reflects a broader risk aversion in the market as investors seek the stability of the dollar in the face of economic uncertainty.
The surge in US 10-year bond yields has added to this sentiment. Higher yields typically attract investors looking for better returns, which has contributed to the dollar’s sustained upward momentum. As a result, currencies like the Mexican Peso have weakened against the dollar, further pushing the USD/MXN exchange rate higher.
Mexican Retail Sales Underwhelm
On the domestic front, Mexico’s retail sales data for August fell short of expectations. Retail sales rose by only 0.1% on a monthly basis, compared to the anticipated 0.2%. On an annual basis, the indicator registered a 0.8% decline, significantly worse than the 0.4% decrease that was forecast. This sluggish performance has weighed on the Mexican Peso, as weaker retail activity points to softer domestic demand and economic challenges.
The disappointing retail sales data has further compounded concerns over Mexico’s economic outlook, especially in light of external factors such as the strengthening US Dollar and rising US bond yields. Together, these elements have created a challenging environment for the Peso, pushing it to multi-week lows against the dollar.
Political and Economic Context
Adding to the economic volatility, the latest poll data from the New York Times shows a slight shift in US political sentiment. Former President Donald Trump has dropped by one point in voting intentions compared to his Democratic opponent, Kamala Harris. According to the poll, Harris would secure 49% of the vote, while Trump would garner 47%. This political uncertainty, particularly in the context of the upcoming US elections, could further influence market behavior, particularly in terms of risk appetite and investor sentiment.
Meanwhile, the Federal Reserve’s next monetary policy move remains a key focus for investors. According to CME Group’s FedWatch tool, there is a 90.9% chance that the Fed will implement a 25-basis-point interest rate cut at its next meeting on November 7. Only 9.1% of market participants expect the Fed to maintain its current rate. This anticipated rate cut is also contributing to movements in the foreign exchange market as traders adjust their positions based on expected changes in US monetary policy.
USD/MXN Price Levels and Outlook
The Dollar/Mexican Peso exchange rate is currently at 19.97, reflecting a 0.11% gain. The overall trend on short, medium, and long-term charts indicates a clear upward trajectory for the pair. Immediate resistance is found at 20.15, which corresponds to the high recorded at the beginning of September. A break above this level could see the bulls targeting the 20.57 level, which was the ceiling in September 2022, and the psychological resistance zone of 21.00.
On the downside, support is found at the 100-period moving average on the hourly chart, near 19.91. Should the USD/MXN fall below this level, the next key support zone lies in the 19.75/19.65 range, which coincides with the lows from October 18 and 22. A move below this support zone would suggest a reversal of the current upward trend, though the broader outlook remains bullish for the moment.
The USD/MXN exchange rate continues to rise as market conditions favor the US Dollar, driven by higher US Treasury yields and the Fed’s expected rate cut. In contrast, weaker-than-expected Mexican retail sales have weighed on the Peso, contributing to the pair’s upward movement. With political uncertainty in the US and a complex economic landscape, the near-term outlook for USD/MXN remains volatile, with key resistance levels to watch as the market evolves.
Major Bank Exchange Rates as of Wednesday Morning
As of early Wednesday, October 23, Mexico’s major banks reported selling prices for the dollar above 20 pesos, further underscoring the impact of volatility in the foreign exchange markets. The following are the latest selling prices at prominent banks, according to Bloomberg Línea (6:52 AM, Mexico City time):
- Banorte: 20.25 pesos per dollar
- BBVA México: 20.25 pesos per dollar
- Banco Azteca: 20.40 pesos per dollar
- Citibanamex: 20.42 pesos per dollar
Puerto Vallarta, Mexico - The Mexican Peso exchange rate with the US Dollar began Wednesday's session around 19.73 but experienced significant gains throughout the morning, reaching a new six-week high at 20.10. The movement is driven by the continued momentum of the US Dollar, coupled with disappointing Mexican retail sales data. This development has raised market concerns, adding further volatility to the foreign exchange market.
