Mexican Peso trades mixed as markets absorb heightened geopolitical risk

The Mexican Peso trades mixed in its key pairs as markets absorb heightened geopolitical tensions and idiosyncratic factors.

The Peso has completed five up days in a row on a more optimistic outlook and the expectation of interest rates remaining elevated in Mexico. 

USD/MXN trades sideways within a larger rising channel, falling closer to support at the channel’s base.

The Mexican Peso (MXN) whipsaws between tepid gains and losses in its key pairs – USD/MXN, EUR/MXN and GBP/MXN – during the European session on Wednesday. A sudden ramping up of geopolitical uncertainty is causing ripples in global financial markets, and idiosyncratic factors are also an ingredient to the mix. Markets are jittery after Russia’s announcement that it has lowered the bar for the deployment of nuclear weapons in response to the US agreeing to allow Ukraine to use US-made missiles to strike targets in Russia. 

This follows a five-day winning streak for the Mexican Peso built on the back of the waning effect of the Trump-trade on the US Dollar (USD), optimistic growth and deficit-reduction plans of the Mexican government, and a positive lift from the outcome of the Bank of Mexico’s (Banxico) November policy meeting.