USD/MXN finds resistance at 22.80 and Mexican peso recovers ground
- Mexican corrects higher on Friday versus US dollar, still under pressure.
- USD/MXN posts second consecutive weekly gain remains capped by 22.80.
The USD/MXN is about to end the week higher for the second time in a row. The Mexican peso continues to face headwinds after a strong rally in May. The improvement in market sentiment eased after the sharp rally in Wall Street and now emerging market currencies are facing difficulties holding onto recent gains.
On Thursday, USD/MXN reached levels above 22.80 and then pulled back. On Friday it found support at 22.50 and it was about to end the week hovering around 22.55/60.
Emerging market currencies posted mixed results during the week. The Brazilian real, the Chilean peso and the Mexican peso were among the worst performers, on economic woes and amid the spread of the coronavirus.
Week ahead
The economic calendar shows a relatively quiet week in the US. Probably US jobless claim data (Thursday) will be watched closely. Other reports include existing home sales, Durable Goods Orders and Consumer Sentiment.
In Mexico, the key event will be the board meeting of the central bank. The Bank of Mexico is expected to cut rates by another 50 bps. “We believe the central bank will need to continue to lower interest rates as economic growth continues to slow and inflation remains below its long-run average. Moreover, we look for another 100 bps of rate cuts over the next three months, bringing the policy rate to 4.50%”, explained analysts at Wells Fargo.