- The Mexican peso increases the shoulders on flexible data, extends the four-day rally while traders meet-china in Switzerland.
- Mexico consumer confidence decreases for the seventh month; Automobile exports collapse in new American rates.
- Fed officials maintain an expected approach, highlighting the uncertainty about the impact of prices on the American economy.
Friday, the Mexican peso recorded modest gains against the US dollar (USD) while the market participants became careful before the American-Chinese talks in Switzerland. The emerging currency of the market (EM) remained imperturbable by worse economic perspectives than expected while Mexico data continued to deteriorate.
When writing the editorial's time, the USD / MXN is negotiated at 19.46, below its opening price of 0.33%, testing the bottom of the current year (YTD).
The confidence of the consumers of Mexico, as revealed by the Instituto Nacional de Estadística, Geografía e informática (INEGI), has shown that households have become pessimistic about the prospects in April. The figures went from 46 to 45.3 for the seventh consecutive month.
Other data revealed by INEGI included automobile production and exports, the two figures decreasing while the new American prices on cars had an impact on production, leading to a reduction in shipments in the United States.
Despite the publication of dismal economic data, the PESO has strengthened with the USD / MXN falling for the fourth consecutive day.
Through the northern border, officials of the Federal Reserve (Fed) made the headlines. They stressed that the current monetary policy is appropriate and that the central bank must wait and see how the prices have an impact on the American economy.
Daily Digest Market Movers: weakness of the automotive industry to weigh on Mexican peso
- Motor production dropped 9.1% in April, against an increase of 12.1% the previous month. Among the main brands that have reduced their production are Stellantis, down -46.7%, followed from BMW to -27.1%.
- Automobile exports in April from Mexico plunged -10.9% following an increase of 3.8% in March, Inegi revealed. Mazda and Volkswagen experienced reduction of -60.9% and -44.4%, respectively, in exports.
- Mexico inflation data in April increased by 3.93% in annual sliding, greater than 3.90% forecasts. Basic prices increased by 3.93% against 3.64% higher than 3.92% estimates.
- Trader's objective moved to the Mexico Banco Monetary Policy meeting (Banxico) on May 15. The economists interviewed by Citi expect a rate of 50 basic points (BPS) reduced by the Mexican institution, supported by the last policy declaration revealed by the Central Bank.
- Although Mexico’s economy has narrowly avoided a technical recession, the prices imposed on Mexican products, a reduced budget and geopolitical uncertainties will continue to reduce the country's finances and impact on the PESO.
USD / MXN technical perspectives: Mexican peso finds strength while USD / MXN YTD low
The USD / MXN tests the Low YTD, but the sellers come up against buyers while market players are preparing for the weekend. A daily / weekly fence below 19.50 could exacerbate a movement towards the figure of 19.00.
The relative force index (RSI) promotes sellers, which indicates that a new weakness is ahead.
Conversely, if buyers raise the USD / MXN after 19.59, the next resistance is the simple mobile average of 20 days (SMA) to 19.66, followed by SMA from 200 days to 19.99 before SMA from 50 days to 20.02.
Mexican peso faq
Mexican peso (MXN) is the most exchanged currency among its peers in Latin America. Its value is largely determined by the performance of the Mexican economy, the country's central bank policy, the amount of foreign investments in the country and even the levels of funding of funds sent by Mexicans who live abroad, in particular to the United States. Geopolitical trends can also move MXN: for example, the proximity process – or the decision of certain companies to move manufacturing capacity and provide channels closer to their country of origin – is also considered a catalyst for Mexican currency, because the country is considered a key manufacturing center of the American continent. Another MXN catalyst is oil prices because Mexico is a key exporter of the goods.
The main objective of the central bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (or near its 3%target, the median point in a strip of tolerance between 2%and 4%). To this end, the bank establishes an appropriate interest rate level. When inflation is too high, Banxico tries to tame it by increasing interest rates, which makes more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for Mexican Peso (MXN) because 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 versions are essential to assess the state of the economy and may have an impact on the assessment of Mexican Peso (MXN). A strong Mexican economy, based on strong economic growth, low unemployment and great confidence is good for MXN. Not only does it attract more foreign investments, but it can encourage the Bank of Mexico (Banxico) to increase interest rates, especially if this force meets with high inflation. However, if the economic data is low, MXN is likely to depreciate.
As an emerging market currency, Mexican Peso (MXN) tends to strive during risk periods or when investors perceive that the larger risks of the market are low and are therefore impatient to engage with investments that include a higher risk. Conversely, MXN tends to weaken in times of market turbulence or economic uncertainty because investors tend to sell higher risk assets and to flee to more stable shelters.
