• USD/MXN tumbles by 0.78%, underpinned by Banxico’s hawkish stance on maintaining higher interest rates, countering mixed US economic data.
• US manufacturing activity slows, with ISM PMI signaling a recessionary trend; the job market remains tight despite a surge in private hiring.
• Federal Reserve officials hint at bypassing June’s rate hike, while Bank of Mexico signals holding record-high interest rates for at least two more meetings.

USD/MXN dropped sharply, as the Mexican Peso (MXN) was bolstered by hawkish remarks by Bank of Mexico (Banxico) policymakers, while its minutes show the central bank’s commitment to hold rates higher. Furthermore, mixed economic data from the United States (US) hit the greenback, with the US Dollar (USD) registering its biggest daily loss since May 3. The USD/MXN is trading at 17.5444, down 0.78%.

Mexican Peso bolstered by Banxico’s stance on rates; US Dollar registers biggest daily loss since May 3 as manufacturing activity slows

Wall Street began June on the front foot, with gains spurred by the AI frenzy. The financial markets narrative shifted towards the economy after the US debt-ceiling issue was solved, though pending approval by the US Senate.

Delving into the USD/MXN, economic data from the US showed that manufacturing activity in May slowed, with the ISM PMI coming at 46.9, below forecasts, and April’s 47.1 – a recessionary signal, falling for a seven-straight month. Aside from this, the US Department of Labor revealed that unemployment claims for the week ending May 27 edged lowered, at 232K beneath estimates but exceeding the prior’s week release.

Further labor data showed that private hiring crushed April’s data, as demonstrated by the ADP Report, indicating that the economy added 278K jobs, surpassing 170k estimates, but lagged April’s 291K. This underlines a tight labor market.

Switching to central bank speakers, Federal Reserve officials led by Patrick Harker emphasized his stance for skipping June’s rate hike and commented that it’s time to hit the stop button at least for one meeting.

In the meantime, Banxico’s latest meeting minutes showed that inflation and inflationary pressures were easing but remained high at a meeting where the central bank held rates unchanged at 11.25%, which has put the carry trade in play and the minutes highlighted comments made on Wednesday that rates would remain on hold for “an extended period.”.

Meanwhile, Bank of Mexico officials led by Governor Victoria Rodriguez Ceja will hold interest rates at a record-high for at least the next two meetings before considering easing, she said.

USD/MXN Technical Levels