- The Mexican Peso Pair losses after Trump's signaling to openness to the “low and fair” tariffs and potential renegotiation of the USMCA.
- The US trade shortage has expanded more than expected, pressing the US dollar leading the fed policy decision.
- The CPI release of Mexico businessmen on May 8 for clues to the next Banxico rate transfer.
Mexican Peso recovered some land on Tuesday against the greenback as entrepreneurs were digging the latest US trade balance figures (US), which showed trade shortage. A difficult economic docket in Mexico maintains entrepreneurs waiting for the release of Wednesday's Federal Open Market (FOMC) Federal Open Market Policy (FOMC) policy. At the time of writing, the USD/MXN traded at $ 19.67, down 0.08%.
The risk of appetite remains depressed early at the FOMC assembly. US trade policies continue to take the titles as the US president said he is open to imposing low and fair tariffs on partners who seek to avoid higher duties. He added, “This will be a very coated number, it will be a low number. We are not looking for injured countries.”
Trump added that he is willing to start discussions to redo the USMCA Free Trade Agreement with a partnership with Canada Prime Minister Mark Carney.
The Mexican Peso rallies in Trump's comments, with the USD/MXN who got earlier acquired and negatives in the sun. Meanwhile, entrepreneurs are awaiting the release of Mexico's Consumer Index (CPI) report on May 8. This follows a slight increase in April's mid-month inflation report, which showed a jump in prices, even though it remained within Banco de Mexico's (Banxico) 3% with or minus 1% of inflation goals.
The US trade balance revealed the US deficiency to expand more than expected, according to the United States Commerce Department.
Daily Digest Market Movers: Mexican Peso Muchly appreciated Fed's meeting
- USD/MXN entrepreneurs are waiting for the upcoming federal reserve decision. If the Fed holds rates that are unchanged, the difference in interest rate will remain unchanged. However, if the edges of Mexico's inflation lower, according to May 8 data, expectations that Banxico will reduce borrowing costs by 50 basic points (BP) on May 15 will increase.
- The Citi Mexico's expectation survey shows that most analysts estimate Banxico to cultivate rates of 50 bps.
- The US Commerce Department has announced that the trade balance is $ -140 billion higher than expected, to $ -137 billion, and exceeds the $ -123.2 billion printing of February.
- Even the latest Gross Domestic Product (GDP) of Mexico surprised the markets, with the economy that dodging a technical backwards, tariffs imposed on Mexico products, a reduced budget, and geopolitical uncertainty will continue to emphasize the country's financial finances and influence the country's financial.
The technical perspective of USD/MXN: Mexican Peso remains bullish while USD/MXN remains below the 200-day SMA
From a technical point of view, the USD/MXN remains down bias. Recently, the odd pair failed to clear the 20-day simple moving average (SMA) at 19.78, an indication that sellers were in charge of the near term. Consumers' momentum seems to be missing, as the Kaba -Child Index (RSI) index describes, indicating that the integration is ahead.
If the USD/MXN removes the current year-to-date (YTD) of less than 19.43, it can provide the path to the psychological 19.00 figures. In addition, the next floor is June 28 with high support at 18.59.
Conversely, if the USD/MXN climbed over the past 19.78, expect a 200-day SMA test at 19.98. A violation of the latter will expose the 20.00 mark.
Mexican peso faqs
Mexican Peso (MXN) is the most traded currency among Latin American peers. Its value is widely determined by the performance of the Mexican economy, the country's central bank policy, the value of foreign investment in the country and even the levels of remittances sent by Mexicans living abroad, especially in the United States. Geopolitical trends can also move MXN: for example, the nearsshoring process – or the decision of some companies to shift manufacturing capacity and supply chain closer to their home countries – is also seen as a catalyst for Mexico's money because the country is considered a major manufacture hub of American continent. Another catalyst for MXN is oil prices because Mexico is a major exporter of goods.
The main purpose of the central bank of Mexico, also known as Banxico, is to maintain inflation at a low and stable level (at or near its target of 3%, the midpoint at a tolerance band between 2%and 4%). To this day, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will try to tame it by increasing interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the general economy. The higher interest rates are usually positive for the Mexican Peso (MXN) as they lead to higher yields, making the country more attractive -the country is more attractive for investors. Conversely, lower interest rates tend to soften the MXN.
Macroeconomic data leaks are key to assessing the state of the economy and may have an impact on Mexican Peso (MXN) appreciation. A powerful Mexican economy, based on high economic growth, low unemployment and high confidence are good for MXN. Not only does it attract more foreign investment but it can encourage the Bank of Mexico (Banxico) to increase interest rates, especially if this strength is accompanied by high inflation. However, if economic data is weak, MXN is likely to deduct.
As an emerging market market, Mexican Peso (MXN) tends to exert during risk periods, or when investors find that greater market risks are low and thus eager to engage in investments that carry a higher risk. Conversely, MXN tends to weaken in times of market disturbance or economic uncertainty because investors tend to sell increased risk properties and flee to more stable safe havens.
