Mexican Peso holds firm as inflation cools, fiscal plan lands

The Mexican Peso maintained its gains against the US Dollar on Wednesday after Mexico's government fiscal plan was approved in Congress, while traders awaited US inflation data. The USD/MXN pair traded at 16.89, slightly down 0.09% near year lows. Mexico's budget for 2027 anticipates a smaller deficit and reduced support for Petroleos Mexicanos (PEMEX), projecting it to post a surplus.

The government aims to cut PEMEX's debt payments to approximately $4.8 billion in US dollars, a nearly 70% decrease from this year. Mexico forecasts economic growth between 1% to 2% and a primary fiscal surplus of 0.6% of GDP next year, excluding debt payments. The National Statistics Agency announced the August inflation report at 3.26%, slightly below expectations and up from July's 3.12%.

Core inflation rose to 3.88% from the previous year, surpassing the Bank of Mexico's 3% plus/minus 1% goal. In the US, the ADP Employment Change 4-week average exceeded estimates but had little impact on investors focusing on US inflation data. The upcoming US Bureau of Labour Statistics (BLS) will release PPI and CPI for August.

A surge in US inflation could trigger a potential Fed rate hike at the September 15-16 meeting. USD/MXN currently trades at 16.9044, near a two-year low and below the 17.00 figure, with a bearish tone. Support is near 16.8866, while resistance remains around 17.2154. Analysts believe the Mexican Peso's value is influenced by Mexico's economic performance, interest rates, foreign investment, remittances, geopolitical trends, and oil prices. The Bank of Mexico aims to keep inflation near its target of 3%.