- The Mexican weight depreciates while the USD/MXN rises to 19.60 due to the demand for refuge is sure to drive the dollar.
- Mexico dodges the technical recession, but the perspective is still fragile, warns Pantheon Macroeconomics.
- The US GDP contraction, the weak employment data and persistent inflation generate concerns about stagflation.
- The underlying PCE low but remains above the 2% target of the Fed, feeding speculation about feat cuts.
The Mexican peso lost ground against the US dollar and fell more than 0.31% at the last hour of the North American session due to fears that the US could face an economic recession, according to the data. At the same time, Mexico’s economy expanded surprisingly in the first quarter, dodging a “technical recession.” At the time of writing, the USD/MXN is traded at 19.60 while the Asian session begins.
The US economic data and Mexico promoted the USD/MXN torque on Wednesday. In the US, the Gross Domestic Product (GDP) of the first quarter of 2025 did not comply with the estimates and revealed that the economy is being contracting. On the other side of the border, the National Institute of Statistics and Geography (INEGI) revealed that the economy grew, against economists’ estimates.
Andrés Abadía, chief economist for Latin America in Pantheon Macroeconomics, wrote in a note to customers: “The gain of one quarter to another helped the Mexican economy to avoid a technical recession, but little alters the weak trajectory.”
Although the divergence in economic growth favored weight, other US data caused a flight to the safe refuge status of the dollar. Weak labor market data and high prices activated an alarm on a possible stagflation scenario in the US.
ADP revealed that companies hired less people in April than in March. Thirty minutes after the opening of the Action Market in the US, the Federal Federal Reserve inflation indicator, the underlying personal consumption expenditure index (PCE), revealed that inflation dropped as expected. However, it remained above the objective of 2% of the Fed.
Daily summary of market movements: the Mexican weight fails to rebound despite the good GDP data
- The economic data of Mexico revealed on Monday showed that the commercial balance presented a surplus and that the conditions of the labor market remain solid, since the unemployment rate decreased in March compared to February.
- The economic data revealed last week showed the continuous economic slowdown, since retail sales in February did not comply with estimates. However, not everything is said, since operators expect the GDP of the first quarter.
- Inegi revealed that the GDP of the first quarter of 2025 was 0.2% quarterly. The figure exceeded the 0% forecast and improved compared to the contraction of -0.6% of the fourth quarter of last year, aligning with the estimates.
- On the other side of the border, the US GDP contracted 0.3% in the first quarter of 2025, not fulfilling the expectations of an expansion of 0.4% and marking a strong deceleration with respect to the growth of 2.4% of the fourth quarter of 2024, according to the Department of Commerce.
- US employment data for April showed that private companies added 62,000 jobs, well below the 108,000 estimate, suggesting that non -agricultural payrolls on Friday could also disappoint.
- As expected, the PCE price index – the preferred inflation indicator of the Fed – submitted 2.6% year -on -year in March, decreasing from 3% in February, which points to continuous disinflation.
Technical Perspective of the USD/MXN: The Mexican weight remains bullish while the USD/MXN remains below the 200 -day SMA
From a technical perspective, the USD/MXN maintains a downward bias, but has established itself during the last ten days. As the price action indicates, it seems that sellers lack the force to push the torque below the minimum of the year to date (YTD) of 19.46 of April 23, which could make the torque move if it exceeds that level. In that case, the following support would be the psychological level of 19.00.
On the contrary, if the USD/MXN recovers above the 200 -day SMA in 19.96, this could clear the way to challenge the figure of 20.00 followed by the 50 -day SMA in 20.12.
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.
