The Mexican Peso (MXN) has gained value against its major counterparts, supported by a weaker US Dollar (USD) and the European Central Bank’s (ECB) rate cut. The expectation of lower interest rates in Europe and the US has weighed on the USD, EUR, and GBP. Meanwhile, Mexico’s high interest rates continue to attract foreign capital inflows.

Fed Rate Cut Expectations

The possibility of a larger 0.50% rate cut by the Federal Reserve (Fed) at its upcoming meeting has increased following comments from former New York Fed President William Dudley and media reports. This has weakened the USD.

ECB Rate Cut

The ECB cut its deposit rate by 0.25% as expected, but the accompanying statement suggested a potential for further rate cuts. This, along with the downward revision to ECB economic growth forecasts, has weakened the Euro (EUR).

Economic Data

Eurozone Industrial Production decreased by 2.2% year-over-year (YoY) in July, which was better than expected. The Michigan Consumer Sentiment Index for September is expected to remain steady.

Mexican Peso Outlook

The Mexican Peso remains relatively strong despite the passage of controversial judicial reforms. The currency is benefiting from nearshoring trends and reduced political risk following the presidential debate.

USD/MXN Technical Analysis

The USD/MXN pair has broken out of a descending channel, suggesting a potential uptrend. The next target is 19.62, followed by 19.50. However, the Relative Strength Index (RSI) suggests a potential correction.