Mexican Peso remains steady as low trading volume marks US Presidents’ Day.

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• Mexican Peso remains steady as low trading volume marks US Presidents’ Day.
• Mexico’s IOAE indicates a -0.7% MoM contraction with a modest 1.3% annual growth in early 2024.
• US-Mexico trade disputes over steel and aluminum exports could impact the Peso’s future stability.

The Mexican Peso seesaws against the US Dollar on Monday as low volume trading is due to the United States observing Presidents’ Day. The Indicator of Economic Activity (IOAE), which provides preliminary readings on a monthly basis, suggests the Mexican economy most likely contracted in January 2024. The USD/MXN trades at 17.05, almost flat, at the time of writing.

Mexico’s National Statistics Agency (INEGI) revealed the IOAE contracted -0.7% MoM. In annual comparison, the economy most likely grew by 1.3% at the beginning of 2024. Late in the week, Mexico’s economic schedule will feature Retail Sales, the Gross Domestic Product (GDP) for Q4 2023 and the mid-month inflation report in February.

The USD/MXN remains weak, accumulating losses of 0.59% in year-to-date (YTD) figures. Nevertheless, pressure from the US regarding Mexico’s exports of steel and aluminum, along with implicit risks of the general election, threaten to derail the Mexican currency.

US trade representative Katherine Tai warned Mexico that the US could reimpose tariffs on imports of the aforementioned commodities if the Mexican Government, led by Andres Manuel Lopez Obrador (AMLO), fails to take urgent measures to stop the increase in exports. US authorities question Mexico’s lack of transparency on imports of steel and aluminum from third countries.

The USD/MXN seesaws near the 17.05 mark, below the 50-day Simple Moving Average (SMA) at 17.09. Even though that favors further downside, sellers must drag the exchange rate below the 17.00 figure if they would like to remain hopeful of challenging last year’s low of 16.62.

Otherwise, if buyers reclaim the 50-day SMA, followed by the latest cycle high of 17.22, that will expose the 200-day SMA at 17.29. A decisive break and the USD/MXN could rally toward the 100-day SMA at 17.39, followed by the 17.50 area. Buyers will eye a re-test of the 18.00 mark.

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