- The Mexican peso rejects pliable data, extends the four-day rally as traders from the USA-china meeting in Switzerland.
- Consumer’s Mexican trust is immersed in the seventh month; Car exports fell under recent US tariffs.
- FED officials maintain an approach to waiting and seeing, emphasizing the uncertainty about the impact of the tariff on the US economy.
The Mexican peso (MXN) registered modest profits compared to the American dollar (USD) on Friday, because market participants became careful before US-China talks in Switzerland. The market currency of the emerging (EM) remained incompatible due to the worse than expected economic perspectives, when Mexico’s data continued to deteriorate.
At the time of writing, USD/MXN trades at 19.46, below the opening price by 0.33%, testing the current year on year (YTD).
Mexico’s consumer trust, as revealed by the Instituto Nacional de Estadística, Geografía E Informan (Inegi), showed that households became cynical regarding prospects in April. The numbers fell from 46 to 45.3 in the seventh month in a row.
Other data disclosed by Inegi included car production and export, with both numbers when the recent US tariffs on cars influenced the production, which led to a reduction in shipments to the USA.
Despite the publication of gloomy economic data, the peso strengthened when USD/MXN fell for the fourth day in a row.
On the northern border, Federal Reserve Officials (FED) were on the headlines. They emphasized that the current monetary policy is appropriate and that the central bank must wait and see how tariffs affect the US economy.
Daily Digest Market Movers: Weakness in the automotive industry to consider Mexican peso
- Car production fell by 9.1% in April, compared to 12.1% augment in the previous month. Among the main brands that reduced their production are Stellantis, a decrease by -46.7%, followed by BMW at -27.1%.
- Mexican car exports dropped by -10.9% to an augment of 3.8% in March, revealed inegi. Mazda and Volkswagen experienced a decline by -60.9% and -44.4%, respectively.
- Data on Mexico inflation in April increased by 3.93% y / y, above the forecasts 3.90%. Basic prices have increased by 3.93% compared to 3.64% above estimates 3.92%.
- The trader’s concentration moved to the Banco de Mexico (Banxico) monetary policy meeting in May 15. Economists surveyed by Citi expect a reduction in the rate at 50 base (BPS) by the Mexican institution, supported by the latest political statement revealed by the central bank.
- Although Mexico’s economy has avoided technical recession narrowly, tariffs applied to Mexican products, a reduced budget and geopolitical uncertainty will continue to burden the country’s finances and will affect PESO.
Technical perspectives in USD/MXN: Mexican peso regains strength, such as USD/MXN tests
USD/MXN tests low YTD, but sellers try with buyers when the market players are preparing for the weekend. Daily/weekly closing below 19.50 may exacerbate traffic towards 19.00.
The relative force indicator (RSI) is conducive to sellers, which indicates that further weakness is coming.
And vice versa, if the buyers raise USD/MXN after 19.59, the next resistance would be a 20-day straight movable average (SMA) at 19.66, and then the 200-day SMA at 19.99 before the 50-day SMA at 20.02.
Mexican PESO questions
The Mexican peso (MXN) is the most traded currency among its peers from Latin America. Its value depends widely by the results of the Mexican economy, the policy of the Central Bank of the Country, the amount of foreign investment in this country, and even levels of monetary messages sent by Mexicans living abroad, especially in the United States. Geopolitical trends can also move MXN: for example, the newcombating process – or the decision of some companies to transfer production capacity and supply chains closer to their family countries – is also seen as a catalyst of the Mexican currency, because the country is considered a key production hub on the American continent. Oil prices are the next MXN catalyst, because Mexico is a key exporter of the goods.
The main goal of the Central Bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (in order or 3%similar to the purpose, the middle point in tolerance bands from 2%to 4%). For this purpose, the bank sets an appropriate level of interest rates. When the inflation is too high, Banxico will try to tame it by collecting interest rates, which makes it more costly for households and companies to borrow money, and thus cooling demand and general economy. Higher interest rates are generally positive for the Mexican peso (MXN), because they lead to higher crops, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
The release of macroeconomic data is crucial for the assessment of the state of the economy and may affect the Mexican valuation (MXN). A powerful Mexican economy, based on high economic growth, low unemployment and high trust, is good for MXN. It not only attracts more foreign investment, but can encourage Bank Mexico (Banxico) to augment interest rates, especially if this force connects with increased inflation. However, if economic data is faint, MXN probably absorbs.
As a currency on the emerging market, Mexican peso (MXN) strives to strive during risk periods or when investors see that wider market risk is low, and therefore willingly engage in investments that have more risk. And vice versa, MXN tends to weaken during market turbulence or economic uncertainty, because investors usually sell assets with a higher risk and resort to more stable safe and sound time.
