- The Mexican weight is strengthened as the pause in tariffs between the US and China drives the appetite for risk; The USD goes back after a rally for rumors of policy change.
- Banxico prepares to cut rates for the seventh consecutive time, reducing the rates gap with the US and moderating the additional profits of the MXN.
- Goldman Sachs reviews the projection of the GDP of Mexico by 2025 to 0%, improving from the previous perspective of -0.5%.
The Mexican weight (MXN) extended its profits on Wednesday, reaching a maximum of seven months against the US dollar (USD) while the latter backed away something in the midst of an improvement in the feeling of the market driven by the commercial truce between the US and China. At the time of writing, the USD/MXN trades at 19.39, with a fall of 0.98%.
The US shares markets are mixing mixedly, since the three main US indices have become positive in the year after their fall, which began on April 2, the so -called US release day working to include exchange policy commitments in the agreements, according to a person familiar with the matter. “
In Mexico, the economic agenda was absent on Tuesday and Wednesday. However, the Bank of Mexico (Banxico) will reveal its monetary policy on Thursday. Economists expect a rate of 50 basic points (PBS), the seventh consecutive reduction of the main reference rate of Mexico.
Banxico’s decision will reduce the differential of interest rates between Mexico and the US. This favors a greater increase in USD/MXN, but a sudden change in the economic perspectives of Mexico would limit the profits of the exotic pair.
Goldman Sachs has reviewed the economic growth of Mexico by 2025 to 0% from the previously projected contraction of 0.5%.
In the US, the economic agenda will include inflation figures on the producer side, retail sales and the speech of the Fed president, Jerome Powell.
Daily summary of market movements: the Mexican weight triggers before the decision of Banxico
- If Banxico reduces rates in 50 PBS, it would mark a accumulated total of 250 pbs of flexibility after the Central Bank began its relaxation cycle.
- Recently, Mexico’s Minister of Economy, Marcelo Ebrard, announced that the review of the T-MEC will begin in the second half of 2025.
- On Monday, the industrial production of Mexico slowed in March, as revealed by the National Institute of Statistics, Geography and Informatics (INEGI). This, combined with GDP figures that avoided a technical recession, will probably undermine the Mexican currency.
- Notably, investors reduced their bets that the Federal Reserve (FED) will only cut rates twice instead of three this year, as indicated by the data of the Chicago Commerce Board (CBOT). The Futuro Future Fund Contract of December 2025 shows that market participants expect 57 basic flexibility points.
- Therefore, the monetary policy divergence between the FED and Banxico could add pressure on the weight and push the USD/MXN exchange rate.
Technical perspective of the USD/MXN: The Mexican weight shoots, with the USD/MXN ready to test 19.00
The bassist trend of the USD/MXN resumed on Wednesday when the torque reached a minimum of several months of 19.29, with the operators fixing the view in the figure of 19.00. A rupture of these two levels could pave the way for a minimum challenge of 18.59 of August 19, 2024. From the point of view of the momentum, the relative force index (RSI) remains bassist. Therefore, more falls are foreseen.
On the contrary, if the USD/MXN goes beyond the 19.50 area and reaches a maximum of three days of 19.66, exceeding the simple mobile average (SMA) of 20 days, it could go back something.
Mexican weight FAQS
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.
