Mexican Peso rallies to six-week high on Hormuz deal speculation

The Mexican Peso (MXN) reached a six-week high on Tuesday, driven by the prospect of a deal between the US and Iran reopening the Strait of Hormuz. This would ease global inflationary pressures by allowing ship traffic. The USD/MXN pair traded at 17.26, a high of 17.33. The geopolitical situation is influencing financial markets as negotiations between the US and Iran could boost risk-sensitive currencies.

Mexico's Consumer Confidence improved for the second consecutive month in July, but annually, it declined for the nineteenth straight month. The Bank of Mexico (Banxico) will announce an interest rate decision on Thursday, with a 93% probability of rates remaining at 6.50%. In the US, the JOLTS vacancies for June dropped slightly, indicating a stable labor market.

The US will release jobs data, including ADP Employment Change, job openings survey, jobless claims, and July Nonfarm Payrolls on Friday. The technical analysis shows a bearish near-term bias for USD/MXN, trading near the lower end of support zones. Mexico's central bank aims to maintain low and stable inflation, which influences interest rates and the peso's valuation.

As an emerging-market currency, the MXN tends to perform well during risk-on periods and poorly during market turbulence.