• Mexican Peso snaps two days of gains and falls on Israel/Iran hostilities.
• Banxico’s September poll revised USD/MXN exchange rate expectations upward, while inflation projections were lowered.
• Traders await September’s Nonfarm Payrolls data, with strong results likely boosting the Greenback and further impacting the Peso.

The Mexican Peso registers losses in early trading against the Greenback on Thursday amid increasing geopolitical risks as President Joe Biden is discussing with Israel how to attack Iranian oil facilities. Data from Mexico witnessed an increase in Foreign Exchange Reserves, according to the Bank of Mexico (Banxico). The USD/MXN trades at 19.53, gaining over 0.60%.

Market sentiment has slightly deteriorated by the conflict in the Middle East. The clashes between Israel and Hezbollah continue in southern Lebanon on Thursday. Meanwhile, Israel struck central Beirut and is expected to launch a separate attack on Iranian assets in the near future.

This has impacted the risk-sensitive Mexican Peso, due to its status of an emerging market currency. The US Dollar Index (DXY), which reflects the buck’s performance against a basket of six currencies, has soared 0.43% on the safe-haven flows, regaining the 102.00 figure for the first time since August 20.

Meanwhile, Banxico’s September poll of 40 private groups of analysts and economists revealed that the USD/MXN exchange rate was revised up and would end higher, compared to August poll. The same survey showed that expectations on headline and underlying inflation were lowered, while the main reference rate set by the Mexican central bank is projected to end at around 10%.

In the US, the Department of Labor revealed that the number of Americans filing for unemployment benefits jumped, exceeding forecasts and the previous reading. S&P Global and the Institute for Supply Management (ISM) showed that Services PMI readings were mixed. The former missed estimates, while the latter crushed estimates, expanding at its highest level since February 2023.