- Mexican Peso goes ahead when USD/MXN throws itself below 19.90, down over 1%.
- Peso draws from Mexico’s weak industrial production and declining consumer confidence to evoke recession concerns.
- US consumer sents are throwing themselves in the midst of rising inflation expectations, driven by upcoming Trump administration tariffs.
The Mexican Peso (MXN) stood against the US dollar (USD) on Friday and ignored the softer than expected economic data revealed during the week suggesting the economy can slow down. A deterioration of consumer mood in the United States (USA) exerted pressure on greenback, which is ready to end the week at a loss. USD/MXN trades with 19.86, down more than 1%.
The market atmosphere turned fluently, a wind to the new market currency. Dismal reports in consumer confidence and industrial production in Mexico paint a gloomy financial prospect, further confirmed by Banco de Mexico (Banxico) Director of Economic Research Alejandrina Salcedo Cisneros.
She commented that uncertainty affects the country’s business and suggested a view of a moderate expansion of regional economies. Banxico estimated financial contraction in all regions of the country. Nationwide, growth fell -0.6 % in the 4th quarter compared to the previous quarter of seasonal figures.
In the United States, the University of Michigan (UOM) Consumer Sentiment Index recorded a gloomy pressure, while inflation expectations charged higher because of US President Trump’s customs.
The eyes of the traders are on next week’s Federal Reserve (Fed) political decision. Last Friday, Fed -Chairman Jerome Powell revealed that “market measurements for inflation expectations have moved up, driven by tariffs.”
Next week, dealers will look at retail sales, housing data, Fed’s monetary policy decisions and financial projections.
Daily Digestive Market Violations: Mexican Peso Waves When Greenback weakens
- Mexico’s industrial production throws itself to -2.9% years, worse than December’s -2.7% coincide with a deterioration of consumer confidence suggests that the Mexican Peso could be written off despite the ongoing gains observed mostly due to the total US dollar weakness.
- The economy of Mexico is slowly crashing, as projected by private analysts who are aligned by Banco de Mexico (Banxico). They expect growth of 0.81%.
- Banxico is expected to continue to facilitate policy at the March 27 meeting spurred on by the development of the disinfection process and a stagnant economy.
- On Wednesday, Mexican Finance Minister Edgar Amador Zamora said the national economy is expanding, but shows signs of slowing down to merchant tensions with the United States.
- The University of Michigan (UOM) Consumer Sentiment Survey showed that the mood in March deteriorated from 64.7 to 57.9, under the forecast of 63.1. Remarkably, inflation expectations with Americans who saw 12-month inflation risen from 4.3% to 4.9%. During a five -year period, consumers looked at 3.9%up from 3.5%.
- Futures dealers of the money market had been priced in 67 basic points to ease fat towards the end of the year, down from 74 a day ago.
- A Reuters vote showed that 70 out of 74 economists say the risk of recession has risen in the US, Canada and Mexico.
- In the boiler room, trading spells remain between the United States and Mexico in front and middle. If the countries reach an agreement, it can pave the way for a recovery of the Mexican currency. Otherwise, further USD/MXN head is seen as US tariffs can trigger a recession in Mexico.
USD/MXN Technical prospects: Mexican Peso waves when USD/MXN collapses below 20.00
The USD/MXN finally cleaned the 20th century and hit a fourth month low at 19,84 earlier during the North American session. Momentum favors longer disadvantage of the couple as depicted by the relative strength index (RSI) that turns Bearish and closes to oversold territory. Therefore, the path is tilted with the least resistance to the disadvantage.
The USD/MXN support would be the 200-day simple moving average (SMA) of 19.67. If surpassed, the next stop would be the 19.50s, ahead of September 18, oscillation low at 19.06. For a bullish resumption, the pair’s first ceiling level is 20.00. A crucial break exposes the 100-day SMA of 20.35.
Banxico frequently asked questions
Bank of Mexico, also known as Banxico, is the country’s central bank. Its mission is to preserve the value of Mexico’s currency, the Mexican Peso (MXN) and to set up monetary policy. To this end, its main target is to maintain low and stable inflation within target levels – at or close to its target of 3%, the center of a tolerance band of between 2%and 4%.
The most important tool in Banxico to guide monetary policy is about to set interest rates. When inflation is above the target, the bank will try to tame it by raising the rates, making it more expensive for households and businesses to borrow money and thus cool the economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN. The speed difference with USD or how Banxico is expected to set the interest rate compared to the US Federal Reserve (Fed) is a key factor.
Banxico meets eight times a year and its monetary policy is greatly influenced by decisions made by the US Federal Reserve (Fed). Therefore, the Central Bank’s decision committee usually gathers a week after Fed. Thus, Banxico responds and sometimes expects monetary policy measures set by Federal Reserve. For example, after the Covid-19 pandemic, before the Fed Raised Rates, Banxico did not make it first in an attempt to reduce the chances of a significant depreciation of the Mexican Peso (MXN) and to prevent capital flow that could destabilize the country.