- The USD/MXN rises to its highest level from July 7 in 18.74.
- The US dollar is strengthened by risk aversion.
- The uncertainty for Trump’s tariffs on Mexico after 35% imposed on Canada weighs on Mexican weight.
The USD/MXN has risen this Friday at its highest level in four days in 18.74 after having opened the day testing a daily minimum in 18.60. At the time of writing, the US dollar is quoted in front of the Mexican peso over 18.69, earning 0.48% in the day.
Mexico contains breath after the tariffs of 35% to Canada
The US president Donald Trump imposed a 35% tariff on Canada on Thursday, what this Friday weighs on the Mexican weight, since Mexico can run the same fate.
On the other hand, there is some hope that the delegation sent by Mexican president Claudia Sheinbaum to Washington to negotiate this Friday with commercial representatives of the United States takes effect and tariffs can stay at least 10%.
In the absence of news, which could arrive in the form of publication of US president Donald Trump or letter, investors are cautious against a US dollar that gains ground due to the increase in risk aversion in markets.
On the other hand, Mexico has received new news today, since the country’s industrial production has grown by 0.6% monthly in May, improving the 0.1% descent planned. At an annual level, production has fallen 0.8%, moderating the 1.9% expected decrease in the market.
USD/MXN Price levels
The 14 -day relative force (RSI) index is above 50, reflecting the current strength of the dollar, but point in southern direction, while the daily indicator remains firm below 40, supporting the general bearish trend of the USD/MXN.
Upwards, the first resistance is in the 18.81 area, a mobile average of 100 periods in 4 -hour graph. Above, it is necessary to break above the psychological level of 19.00 to see a greater advance.
Down, a break of the minimum of almost a year reached on Wednesday, July 9 in 18.55 will find initial support in 18.42, August 2024. Below, the USD/MXN has space to fall towards the psychological zone of 18.00 in the direction of 17.70, minimum of July 2024.
Mexican peso – frequent questions
The Mexican weight (MXN) is the most commercialized currency among its Latin American peers. Its value is widely determined by the performance of the Mexican economy, the country’s central bank policy, the amount of foreign investment in the country and even remittance levels sent by Mexicans living abroad, particularly in the United States. Geopolitical trends can also affect MXN: for example, the Nearshoring process (or the decision of some companies to relocate the manufacturing capacity and supply chains closer to their countries of origin) is also considered a catalyst for the Mexican currency, since the country is considered a key manufacturing center in the American continent. Another catalyst for MXN is oil prices, since Mexico is a key exporter of the raw material.
The main objective of the Central Bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%). To do this, the bank establishes an adequate level of interest rates. When inflation is too high, Banxico will try to control it by raising interest rates, which makes the indebtedness of homes and companies more cooling, thus cooling the demand and the economy in general. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN.
The publication of macroeconomic data is key to evaluating the state of the economy and can have an impact on the valuation of the Mexican weight (MXN). A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only attracts more foreign investment, but it can encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this fortress is accompanied by high inflation. However, if the economic data is weak, the MXN is likely to depreciate.
As an emerging market currency, the Mexican weight (MXN) tends to rise for periods of risk, or when investors perceive that the general market risks are low and, therefore, are eager to participate in investments that carry a higher risk. On the contrary, the MXN tends to weaken at times of market turbulence or economic uncertainty, since investors tend to sell higher risk assets and flee to the most stable safe shelters.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
