USD/MXN back above 22.00 after hitting lowest since mid-March

• Mexican peso holds bullish bias versus the US dollar after surging in May.
• USD/MXN tests levels under 22.00 again, but remains unable to stay below.

The USD/MXN pair is trading slightly above 22.00 after hitting at 21.92 a fresh two and a half month low. It is modestly lower for the day, about to post the third consecutive decline and the tenth out of the last eleven trading days. The trend still points to the downside, but the 22.00 area is becoming a strong support.

On a relatively quiet session across financial markets, the Mexican peso rose modestly versus the greenback. The US dollar weakened at the beginning of June, sending the DXY below 98.00, to the lowest in two months.

Mexico and US: data off lows but still on contraction territory

The ISM Manufacturing index for May showed a recovery to 43.1 from the 41.5 registered in May. Analysts at Wells Fargo argue that after some of the worst months on record, today’s report is a step in a better direction.

In Mexico, the IHS Markit Manufacturing PMI rose from a record low of 35 in April to 38.3 in May. Despite the recovery, the index remained sharply low as many businesses stayed closed amid lockdown restrictions.

"Although the latest PMI results revealed a broad-based rise in index readings, the figures remained below 50.0, pointing to further reductions from April's already low base. That said, the rates of decline in key metrics such as output and new orders eased during May, suggesting that contraction are beginning to bottom out. Moreover, with the recent announcement that restrictive measures are to be gradually removed, the trend towards recovery should accelerate over the coming weeks”, commented Eliot Kerr, an economist at IHS Markit.