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The Mexican Peso (MXN) is up\u00a0against the US Dollar (USD) on Friday after the release<\/a> of US Personal Consumption Expenditure (PCE) data for April. The metric is the Federal Reserve’s (Fed) prefered gauge of inflation and it cooled to 0.2% month-over-month\u00a0in the Core PCE component from 0.3% previously. Analysts had expected it to remain unchanged at 0.3%.\u00a0<\/p>\n The rest of the PCE data came out in line with analysts estimates, however, the undershoot in Core PCE suggests inflation may be cooling more quickly than previously thought in the US. This, in turn,\u00a0increases the likelihood the Fed<\/a>\u00a0may see fit to start cutting interest rates. Lower interest rates tend to be negative for a currency since they attract less inflows, so the data negatively impacted the\u00a0US Dollar (USD).<\/p>\n A\u00a0major event for the Mexican Peso on the horizon is the\u00a0Mexican presidential election on Sunday.\u00a0<\/p>\n USD\/MXN is exchanging hands at 16.98\u00a0at the time of writing, EUR\/MXN is trading at 18.46\u00a0and GBP\/MXN at 21.66.\u00a0<\/p>\n The Mexican presidential election on Sunday is likely to see Claudia Sheinbaum, the candidate for the Morena party, replace Andres Manuel Lopez Obrador (AMLO) as president of Mexico. Shienbaum leads the next most popular candidate by 20% in the polls.\u00a0<\/p>\n Her tenure is likely to see an extension of Obrador\u2019s generous welfare programme, and she has pledged to increase the minimum wage by circa 11%. This is likely to boost consumer spending, a key driver of growth in recent quarters, but could make it difficult for Banxico to bring down inflation, says Kimberley Sperrfechter, Emerging Markets Economist at Capital Economics.\u00a0<\/p>\n Despite Donald Trump being convicted of 34 counts of falsifying business records, he still stands a chance of being re-elected in November. Indeed, his conviction has galvanized support for the embattled nominee from within the ranks of the Republican party and led to a flood of donations to his election campaign fund, according to AP News.\u00a0<\/p>\n The US and Mexican trade agreement (USMCA) is up for review in 2026, and there is a risk that Trump, if re-elected, might reintroduce tariffs on Mexican goods. Such a move would also hamper Mexico\u2019s near-shoring prospects.\u00a0<\/p>\n For this reason, Sperrfechter thinks that the Peso\u2019s \u201cperiod of outperformance has largely run its course\u201d and expects the currency to substantially weaken to $19-$20 during the next (Mexican) president\u2019s tenure.<\/p>\n USD\/MXN \u2013 or the number of Pesos that can be bought with one US Dollar \u2013 pulls back and then recovers in a short-term uptrend. Given that \u201cthe trend is your friend\u201d, the odds favor a continuation higher.\u00a0<\/p>\n <\/a><\/p>\n USD\/MXN now sets its sights on the major trendline (black) at circa 17.25. A break above the May 30 high at 17.13 would probably confirm an extension towards the trendline target.\u00a0<\/p>\n The medium and long-term trends remain bearish, however, raising the risk that the pair could reverse lower. As yet, there are no signs of weakness from price action, however. A decisive break above the major trendline would solidify the bullish case and indicate a bullish reversal of the medium-term.<\/p>\n A decisive break would be one accompanied by a long green bar that closed near its high or three consecutive green bars in a row.<\/p>\n The Core Personal Consumption Expenditures (PCE), released by the US Bureau of Economic Analysis<\/a> on a monthly basis, measures the changes in the prices of goods and services purchased by consumers in the United States (US). The PCE Price Index is also the Federal Reserve\u2019s (Fed) preferred gauge of inflation. The YoY reading compares the prices of goods in the reference month to the same month a year earlier. The core reading excludes the so-called more volatile food and energy components to give a more accurate measurement of price pressures.” Generally, a high reading is bullish for the US Dollar (USD), while a low reading is bearish.<\/p>\nMexican presidential election<\/h3>\n
Threat of being trumped<\/h3>\n
Technical Analysis: USD\/MXN pulls back within uptrend<\/h2>\n
USD\/MXN 4-hour Chart\u00a0<\/h3>\n
Economic Indicator<\/h2>\n
Core Personal Consumption Expenditures – Price Index (YoY)<\/h3>\n