Mexican Peso drops 0.08% amidst US economic data showing continued growth and mixed signals from Mexico.

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• Mexican Peso drops 0.08% amidst US economic data showing continued growth and mixed signals from Mexico.
• Strong US GDP growth for Q4 2023 and stable Durable Goods Orders could impact Fed’s rate decisions, contrasting with a cooling labor market.
• In Mexico, a lower unemployment rate and rising inflation pose challenges for Banxico’s policy direction.

The Mexican Peso (MXN) registers minuscule losses against the US Dollar (USD) on Thursday after economic data from the United States (US) witnessed the economy continuing to grow above trend, though below last year’s Q3 4.9% final reading. In the meantime, Mexico’s unemployment rate continued to trend lower at a non-seasonally adjusted rate, along with an uptick in inflation in the first half of January, boosting the emerging market currency. At the time of writing, the USD/MXN trades at 17.22, up 0.08% on the day.

The economy in the US remains solid, growing above trend, and might prevent interest rate cuts by the Federal Reserve (Fed) amid a possible reacceleration of inflation. The Gross Domestic Product (GDP) for the last quarter of 2023 exceeded forecasts, while Durable Goods Orders were unchanged and the labor market showed signs of cooling down.

In Mexico, the Unemployment Rate was non-seasonally adjusted for December and dipped compared to November, revealed the National Statistics Agency (INEGI). Meanwhile, according to analysts at BNP Paribas, the latest inflation report in Mexico could deter the Bank of Mexico (Banxico) from easing policy.

The USD/MXN is virtually unchanged, though trading within familiar levels. If the exotic pair reclaims the 200-day Simple Moving Average (SMA) at 17.35, that could open the door for the pair to challenge the 100-day SMA at 17.42. Further upside is seen above the psychological 17.50 figure, ahead of rallying to the May 23 high from last year at 17.99.

Conversely, if sellers drag prices below the 50-day SMA at 17.13, that would pave the way for further downside. The following support is seen at 17.05, the January 22 low, followed by the 17.00 psychological figure.

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