• Mexican Peso rises 0.26% against US Dollar and dives below 16.60.
  • Weak March Retail Sales data from INEGI ahead of Q1 GDP release and Banxico minutes.
  • Banxico Deputy Governor Espinosa's hawkish stance contrasts with US Fed's cautious optimism on disinflation.

For the latest news on the Mexican Peso click here.

The Mexican Peso posted solid gains against the US Dollar in Monday trading during the North American session. Although Mexican Retail Sales data plunged, the Mexican currency edged up on Deputy Governor Irene Espinosa's hawkish comments last Friday. The USD/MXN trades at 16.56, down 0.26%.

Mexico’s economic docket should be busier than last week. On Monday, the Instituto Nacional de Estadística Geografía e Informática (INEGI) revealed that Retail Sales in March missed the mark in monthly and yearly figures.

The data comes ahead of the release of Gross Domestic Product (GDP) figures for the first quarter of 2024 on May 23. These figures are expected to show that the Mexican economy is slowing amid higher borrowing costs of 11.00% set by the Bank of Mexico (Banxico) on fears of higher inflation and a depreciation of the Peso.

Later that day, Banxico would release the minutes of its latest monetary policy meeting, followed on Friday by the announcement of the Balance of Trade and the Current Account.

Last Friday, Banxico’s Deputy Governor Irene Espinosa, the dissenter of the latest meeting, made hawkish comments stating that March’s rate cut was premature and that it would hinder inflation convergence to the bank’s goal.

Across the border, the Vice-Chair of the Federal Reserve, Philipp Jefferson, said that the policy rate is restrictive, adding that April’s reading is encouraging. However, it’s too early to tell if the disinflationary process will last.

Daily digest market movers: Mexican Peso soars on Espinosa’s hawkish stance

  • Retail Sales in March plunged -0.2% MoM, below February’s 0.5% increase. On a yearly basis, sales plummeted -1.7%, missed estimates of 0%, and trailed the previous month's 3% growth.
  • Diverging views surface in Banxico. Governor Victoria Rodriguez Ceja said last Monday that the bank would discuss lowering rates in the upcoming meeting on June 29. Conversely, Deputy Governor Espinosa commented that lowering rates in March might have delayed inflation convergence toward the central bank’s target by two quarters.
  • According to Bloomberg, leveraged funds increased its net long Peso positions by 3,780 contracts between May 7 and May 14 via CFTC data. Institutional asset managers, which hold the biggest bullish position in the peso with 146,975 contracts, also added to positive momentum with 2,558 long peso contracts in the same week. That has propelled the Mexican Peso to be the best-performing currency in the world so far.
  • Atlanta’ Fed President Raphael Bostic commented that interest rates are likely to remain higher than last decade, adding that Fed is open to all possibilities amid many economic scenarios.
  • Data from the Chicago Board of Trade shows investors are expecting 33 basis points (bps) of the Fed’s easing toward the end of the year, down from Friday’s 35 bps.

Technical analysis: Mexican Peso extends its gains as USD/MXN falls below 16.60

The Mexican Peso continues to rally sharply as the USD/MXN downtrend extends, likely to test the psychological 16.50 figure. Momentum, as depicted by the Relative Strength Index (RSI), favors sellers, yet they seem to take a breather as the downward move stalled.

Once the USD/MXN falls below 16.50, the next stop would be the current year-to-date low of 16.25.

Conversely, if buyers reclaim the 50-day SMA at 16.76, it could exacerbate a rally toward the 100-day SMA at 16.91. Once cleared, the next supply zone would be the 17.00 psychological level. In that event, the next stop would be the 200-day SMA at 17.17.

Mexican Peso FAQs

The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.

The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall 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.

Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.

As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD extends slide below 1.0700 on stronger USD, EU political angst

EUR/USD stays under bearish pressure and trades at its lowest level since early May below 1.0700. Unabated US Dollar demand amid risk aversion and looming EU political uncertainty exert downside pressure on the pair heading into the weekend.

EUR/USD News

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD slumps to multi-week lows below 1.2700

GBP/USD extends its decline on Friday and trades at its lowest level in nearly a month below 1.2700. In the absence of high-tier data releases, the US Dollar continues to benefit from souring market mood, forcing the pair to stretch lower in the second half of the day.

GBP/USD News

Gold clings to recovery gains at around $2,330

Gold clings to recovery gains at around $2,330

Following Thursday's pullback, Gold holds its ground on Friday and trades in positive territory near $2,330. The benchmark 10-year US Treasury bond yield edges lower toward 4.2%, helping XAU/USD push higher ahead of the weekend.

Gold News

Monero price poised for a downward correction

Monero price poised for a downward correction

Monero price has encountered resistance at a critical level. The technical outlook suggests a potential short-term correction as momentum indicators signal a bearish divergence.

Read more

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

Week ahead – RBA, SNB and BoE next to decide, CPI and PMI data also on tap

It will be another central-bank-heavy week with the RBA, SNB and BoE. Retail sales will be the highlight in the United States. Plenty of other data also on the way, including flash PMIs and UK CPI.

Read more

Forex MAJORS

Cryptocurrencies

Signatures