The Mexican Peso is experiencing losses in early trading against the US Dollar on Thursday, driven by escalating geopolitical tensions as President Joe Biden discusses potential attacks on Iranian oil facilities with Israel. According to the Bank of Mexico (Banxico), there has been an increase in Foreign Exchange Reserves. Currently, the USD/MXN is trading at 19.53, reflecting a gain of over 0.60%.
Market sentiment has taken a hit due to the ongoing conflict in the Middle East, particularly the clashes between Israel and Hezbollah in southern Lebanon. Israel has also targeted central Beirut and is anticipated to launch further strikes on Iranian assets soon.
This situation is affecting the risk-sensitive Mexican Peso, as it is classified as an emerging market currency. The US Dollar Index (DXY), which measures the performance of the Dollar against a basket of six currencies, has risen by 0.43% due to safe-haven flows, surpassing the 102.00 mark for the first time since August 20.
Additionally, Banxico’s September poll of 40 private analysts and economists indicated that the USD/MXN exchange rate was revised upwards and is expected to close higher compared to the August poll. The same survey showed a decrease in expectations for both headline and underlying inflation, while the main reference rate from the Mexican central bank is projected to end around 10%.
President Claudia Sheinbaum has proposed a 12% wage increase for 2025, according to news reports.
In the US, the Department of Labor reported a rise in the number of Americans filing for unemployment benefits, surpassing forecasts and previous figures. The S&P Global and the Institute for Supply Management (ISM) released mixed Services PMI readings, with the former missing estimates while the latter exceeded expectations, showing expansion at its highest level since February 2023.
Looking ahead to Friday, USD/MXN traders will be focused on the release of September’s Nonfarm Payrolls figures. If the data exceeds estimates, it would likely be favorable for the Greenback.
