- USD/MXN gains traction to near 19.05 in Friday’s early European session, up 0.98% on the day.
- Escalating Israel-Iran tensions provide some support to the US Dollar.
- Rising Fed rate cut bets and higher oil prices might cap the upside for the pair.
The USD/MXN pair gathers strength to around 19.05, snapping the two-day losing streak during the early European session on Friday. The risk-off sentiment amid escalating Israel-Iran tensions exerts some selling pressure on the Mexican Peso (MXN) against the Greenback. Traders will keep an eye on the preliminary reading of the US Michigan Consumer Sentiment report, which will be released later on Friday.
Israel launched a series of airstrikes against Iran early Friday morning, raising fears of wider geopolitical tensions in the region, per CNBC. Israel’s Defense Minister Israel Katz declared a state of emergency shortly after the attack began and warned people that “a missile and drone attack against the State of Israel and its civilian population is expected in the immediate future.”
Iranian state media conveyed a statement from Iran’s Armed Forces General staff that the US and Israel will receive a “harsh blow” in response. Investors will closely monitor the developments surrounding conflicts between Israel and Iran. Any signs of escalating tensions between those countries could boost the safe-haven flows, supporting the US Dollar (USD).
On the other hand, a rise in Crude oil prices could help limit the Mexican Peso’s losses as Mexico is a major oil exporter and higher crude oil prices tend to have a positive impact on the MXN value.
Data released on Thursday showed US producer prices increased less than expected in May, weighing on the Greenback. The latest data followed Wednesday’s cooler-than-anticipated Consumer Price Index (CPI) report for May. Traders see an 80% odds of a September Fed rate cut, with a second rate cut as soon as October, versus December as seen before the inflation data, according to the CME FedWatch tool.
