• Mexican peso accelerates versus the US dollar at the beginning of the week.
• USD/MXN breaks 19.70 and then 19.50, two critical support areas.
• Improvement in risk sentiment boosts demand for emerging market currencies.

The USD/MXN is falling for the fifth consecutive day on Monday. It reached 19.41, the lowest level since March 2020. It is hovering slightly below 19.50, trimming losses.

Global equity markets are rising on Monday, extending last week’s rally. The fact that major Chinese cities began to relax COVID controls over the weekend helped risk sentiment. Commodity and crude oil prices are higher on Monday.

Emerging market currencies are up versus the dollar, also supported by higher interest rates. The best performer on Monday are the Russian ruble (USD/RUB down 6.15%) and the Korean won (USD/KRW falls 1.75%).

Key data ahead

Activity in the US is limited on Monday due to Memorial Day. The key report of the week will be on Friday with the Non-farm payroll report.

In Mexico, the most important event will be Banxico’s quarterly inflation report on Wednesday. “Given recent comments and decisions, we expect the report to tilt hawkish.  At the May meeting, it hiked rates 50 bp to 7.0% by a 4-1 vote, with Deputy Governor Espinosa dissenting in favor of a 75 bp hike. However, the minutes showed that two more policymakers were open to a larger move”, explained analysts at Brown Brother Harriman. They point out the next meeting “will be a very close call between 50 and 75 bp and will depend on how the data come in.”

Technical levels