Background on the Mexican Peso and its Current Situation
The Mexican peso has been weakening against the US dollar for three consecutive trading days, as the greenback gains strength. This situation is influenced by recent economic data and expectations regarding the Federal Reserve’s (Fed) potential shift away from continuous monetary easing.
Factors Affecting the Mexican Peso
- Dollar Strength: The US dollar is gaining ground, partly due to the positive economic data from the previous session and anticipation of the Fed possibly not continuing its accommodative monetary policy.
- Triple Witching: Financial market volatility is expected to increase due to the “triple witching” event, which involves the simultaneous expiration of stock options, index futures, and index options. This phenomenon typically strengthens the dollar and weakens the peso.
Expert Analysis and Market Outlook
According to analysts from Monex, the Mexican peso’s weakness is attributed to the dollar’s advance and the correction following previous session losses.
Gabriela Siller, director of financial analysis at Monex, explained that the dollar’s strength is linked to a recovery from prior session losses. She also mentioned that increased market volatility during the “triple witching” event contributes to the peso’s decline.
Recent Peso Performance
Over the past three trading days, the Mexican peso has weakened by 0.6%, following a strengthening trend that took it to 18.1930 pesos per dollar on Wednesday – its highest level since July of the previous year.
Market Expectations and Technical Analysis
Grupo Financiero Banorte anticipates that upward pressure on the peso will persist, as it has surpassed the support level of 18.35 pesos per dollar. The next significant resistance level is expected at 18.50 pesos.
Key Questions and Answers
- What is causing the Mexican peso to weaken? The peso’s weakness stems from the US dollar’s strength, driven by positive economic data and expectations of the Fed altering its monetary policy stance. Additionally, market volatility during the “triple witching” event further impacts the peso.
- How has the Mexican peso performed recently? In the past three trading days, the Mexican peso has weakened by 0.6%, following a period of strengthening that took it to its highest level since July 2021.
- What are market expectations for the Mexican peso? Market participants, such as Grupo Financiero Banorte, expect upward pressure on the peso to continue. They anticipate that the currency will test the resistance level at 18.50 pesos per dollar.
