- The Mexican weight falls 0.46%, reaching a maximum of six days of 20.26 after INEGI’s reports on a weak aggregate demand and a collapse in private spending.
- The Fed keeps the stable rates; Powell highlights the growing economic uncertainty and inflationary risks for tariffs.
- US data show mixed signals; Unemployment requests increase, the manufacturing index of the Philadelphia Fed indicates an economic slowdown.
The Mexican peso (MXN) is extending its losses against the US dollar (USD) on Thursday, since Mexico’s economic data paint a gloomy panorama. At the same time, operators continue to evaluate the last monetary policy decision of the Federal Reserve (FED). The USD/MXN is quoted at 20.13, rising 0.46%.
The weight was drastically weakened at the beginning, since the USD/MXN rose to a maximum of six days of 20.26 when the National Institute of Statistics and Geography (INEGI) revealed several economic data. First, Inegi revealed that aggregate demand in quarterly and annual terms decreased, but continued to expand.
On the other hand, private spending collapsed in the fourth quarter of 2024. At the same time, the statistics agency revealed the preliminary reading of the global economic activity indicator for February, which suggests that Mexico’s economy slowed in annual figures despite improving monthly.
On Wednesday, the Fed kept the rates without changes and announced that it would reduce the rhythm of the decrease in its balance. The officials acknowledged that the labor market is solid, but recognized that inflation is “somewhat” high.
After publishing the monetary policy statement, the president of the FED, Jerome Powell, declared that economic uncertainty has increased, noting that part of the inflation driven by tariff has moved to consumers. Powell said: “Our current policy position is well positioned to face the risks and uncertainties we face,” adding that the Central Bank is in no hurry to cut rates.
Apart from this, US economic data were mixed. The number of Americans who requested unemployment subsidies increased, but was mostly below the estimates, while the manufacturing index of the Philadelphia Fed showed signs of cooling.
What moves the market today: the Mexican weight collapses as the data shows that the economy slowed down in February
- The aggregate demand of Mexico in the fourth quarter of 2024 was 0%, lowering 1.2% intertrrimestral. In annual terms, demand decreased from 2.3% to 1.9%, aligning with consensus.
- The private spending for the fourth quarter collapsed 1.4%, lowering the growth of 1.1%. In the twelve months for the same period, it barely grew 0.4%, below the 3% increase in the third quarter.
- The global indicator of economic activity of Mexico fell 0.7% year -on -year in February compared to the previous month of the previous year, INEGI revealed. Compared to January, the economy probably grew by 0.2% monthly.
- The Organization for Economic Cooperation and Development (OECD) revealed earlier this week that US tariffs on Mexican products could boost a recession in Mexico. If tariffs remain unchanged, the OECD projects that Mexico’s economy will contract 1.3% in 2025 and 0.6% in 2026.
- Through the Summary of Economic Projections (SEP), Fed officials expect two feat cuts in 2025, with rates reaching 3.9%, without changes with respect to December projections. The Fed Fed Inflation Indicator, the Personal Consumption Expenditure Index (PCE), and the unemployment rate were reviewed up. At the same time, GDP growth is expected to fall below 2%, reflecting a slowdown driven by the commercial policies of the US president, Donald Trump.
- Initial unemployment requests for the week that ended on March 15 increased from 221k to 223k, but were below the 224K forecasts. Meanwhile, the manufacturing index of the Fed of Philadelphia fell from 18.1 to 12.5 in February.
- The operators had discounted that the Fed would make the policy more flexible in 68 basic points (PB) throughout the year, according to the data of the Chicago Commerce Board (CBOT).
Technical perspective of the USD/MXN: The Mexican weight is removed while the USD/MXN rises above 20.10
The USD/MXN bounced from the annual minimums reached on March 14 in 19.84, although it faces a strong resistance in the single mobile average (SMA) of 100 days in 20.35.
The momentum seems constructive for buyers, as indicated by the relative force index (RSI), which exceeded the last despite remaining below its neutral line. This means that bulls are gaining impulse.
Therefore, if the USD/MXN closes at the daily level of 20.00, look for some rise, with a key resistance in 20.35, the 50 -day SMA in 20.41 and the psychological barrier of 20.50. On the contrary, the first key support is the minimum of the year of 19.84, before the 200 -day SMA in 19.68.
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.
