- The Mexican peso collapses for the fourth consecutive day while the US business policies damage the economy of Mexico.
- Banxico cuts rates in 50 basic points and indicates additional cuts in the middle of recession risks.
- The probabilities of recession in the US increase while the PMI of Chicago remains in contraction territory despite slight profits.
The Mexican peso (MXN) begins the week at a disadvantage against the US dollar (USD), mainly due to a deterioration in the appetite for the risk while investors prepare for the publication of US tariffs on April 2, the US release day at the time of writing, the USD/MXN is quoted at 20.45, with an increase of 0.50%.
Tariffs continue to boost the price action as investors adopt an avevers risk posture, which also weighs on high beta coins such as Mexican weight. Last week, the Bank of Mexico (Banxico) reduced rates at 50 basic points (PBS) at 9%, while insinuating an additional cut of the same magnitude.
In this sense, JP Morgan supports another 50 PBS cut due to the risks of an imminent recession, according to Steven Palacio, bank analyst.
“It is inevitable that Mexico is going through a recession because tariffs and uncertainty about its implementation occur in an economic context that was already in strong decline,” said Palacio.
Meanwhile, the governor of Banxico, Victoria Rodríguez Ceja, said that the Central Bank will remain attentive to US commercial policies and its impact on the country, with a main approach to inflation, as stated in an interview with El Financiero.
On the other side of the border, the data of the PMI of Chicago improved but remained in the territory of consisting consecutive month. The dollar disregarded an increase in the chances of recession in the US, according to Goldman Sachs, with probabilities that increased from 20% to 35% due to pessimism between homes and companies. The White House comments that the Administration will tolerate an economic deceleration did not help.
This week, the Mexican economic calendar will include business confidence, the Global S&P manufacturing PMI and gross fixed investment figures. In the US, the operators focus on the announcement of Trump tariffs on April 2, the March Manufacturing PMI, Jolts employment offers and non -agricultural payrolls.
Daily summary of market movements: Mexican weight falls while Banxico points out that more cuts come
- The business confidence of Mexico in February was 50.4. A reading below that level would indicate that companies are becoming pessimistic about the economy, resulting at its lowest level since May 2021.
- The Global S&P manufacturing PMI remained in contraction territory for eight consecutive months in 47.6 in February. A March impression below this would suggest that the economic slowdown is deeper than expected.
- Chicago PMI data for March increased to 47.6 points from 45.5 and exceeded 45.2.
- The operators had discounted that the Fed would relax politics at 75 basic points (PBS) throughout the year, according to data from the Chicago Board of Commerce.
Technical Perspective of the USD/MXN: The Mexican weight remains afloat while the USD/MXN bulls point at 20.50
The USD/MXN continues to gain impulse after overcoming the confluence of the simple mobile socks (SMA) of 100 and 50 days about 20.35/36, which opened the road to 20.47, a new maximum of two weeks. The relative force index (RSI) indicates that buyers continue to control, with enough margin to boost the upward change rate.
Therefore, the first resistance of the USD/MXN would be 20.50. If it is exceeded, the following roof would be the peak of March 4, 20.99, followed by the maximum of the year to date (YTD) of 21.28. On the contrary, a fall below 20.35/36 would open the way to test the 20.00 mark.
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.
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