Mexican Peso dives on solid US data, despite high inflation

The Mexican Peso (MXN) experienced a 0.91% decline against the US Dollar (USD) on Thursday, despite positive US economic data, as inflation in Mexico edged higher. The USD/MXN pair plummeted to a low of 17.95, trading at 18.14. The decline was attributed to a shift in market sentiment, following OpenAI's revelation that its annual revenue was 20 billion lower than initially reported.

This news negatively impacted tech stocks and caused US equities to tumble, with traders fearing the rally may have been questionable. Before the news, global equities were buoyed by US President Donald Trump's post on Truth Social, claiming productive discussions with Iran and the absence of attacks before the midterm elections.

While the US Dollar Index (DXY) fell 0.07% to 102.17, the MXN underperformed against other G7 currencies. Headline inflation in Mexico increased from 3.26% to 3.45% YoY in September, lower than estimates of 3.47%, while core inflation decreased from 3.88% to 3.75%, below forecasts of 3.8%. Bank of Mexico (Banxico) minutes from their last meeting suggested that they projected an inflation path that remained upwardly skewed.

However, policymakers expressed concerns about inflation exceeding the 4% threshold in the future. In the United States, St. Louis Fed President Alberto Musalem was hawkish, asserting that inflation was above 2% and that further tightening was necessary. The Fed minutes revealed that all members approved the September rate hike, with the board viewing the labor market as "stable and generally viewed as close to maximum employment."

The daily USD/MXN chart currently trades at 18.1986, showing a bullish near-term bias supported by the Simple Moving Averages (SMA) and the Relative Strength Index (RSI) at 72.18, indicating overbought conditions. Should the MXN hold above key support levels at 17.29 and 16.89, traders may view dips as opportunities for buying, anticipating a period of consolidation or a modest pullback before the uptrend can sustainably continue.