- Mexico’s inflation is accelerated in April, but Heath of Banxico points out that the relaxation path will continue.
- The USD/MXN pressed for the improvement of the feeling of risk after the commercial agreement between the US and the United Kingdom that raises the currencies of emerging markets.
- Despite the solid unemployment applications data in the US, the US dollar is maintained before Friday’s Fed comments.
The Mexican peso advanced Thursday against the US dollar, since prices in Mexico accelerated near the upper limit of the inflation tolerance of the Bank of Mexico (Banxico). In addition, an improvement in the appetite for the risk due to the commercial agreement between the US and the United Kingdom increased the attractiveness of the weight. At the time of writing, the USD/MXN is quoted in 19.55, with a 0.15%drop.
Inflation in Mexico accelerated in April, according to the National Institute of Statistics, Geography and Informatics (INEGI). Although this suggests caution by Banxico, its subgovernor, Jonathan Heath, said that it is very likely that the Central Bank will continue to reduce its interest rates, despite the fact that the risks of inflation are rising rise.
Heath added that in the second half of 2025, the decision will be made with more caution, adding that there is room to relax politics. Meanwhile, market participants seem confident that Banxico will cut rates at 50 basic points at the May 15 meeting.
In the US, President Donald Trump announced a commercial agreement with the United Kingdom, which market participants received as good news, and supported the currency of emerging markets (EM). Wall Street extended its profits on Thursday, before a tight calendar for FED officials on Friday, which is expected to monopolize the headlines in the middle of an absent economic agenda.
As for data, the number of Americans who requested unemployment benefits was lower than expected, indicating a robust labor market. Despite this, the USD/MXN failed to gain traction, keeping content during the day and confined in the range of 19.50-19.61.
What moves the market today: the Mexican weight remains firm as the feeling improves
- After the decision of the Fed, the data of the Chicago Board of Commerce (CBOT) suggest that the operators are valuing 67 basic points of relaxation towards the end of 2025.
- Mexico’s CPI in April rose 3.93% year -on -year, above the 3.90% prognosis and an increase from 3.80% compared to last year’s range. The underlying IPC increased by 3.93%, from 3.64%, exceeding 3.92%estimates.
- The CITI Mexico expectations survey indicates that most analysts expect Banxico to cut rates at 50 basic points at the May 15 meeting.
- The initial unemployment applications in the US for the week that ended on May 3 were 228k, slightly below the expected 230k and an improvement compared to 241K of the previous week, according to the Department of Labor. The data indicate a modest rebound in the stability of the labor market.
- Although Mexico’s economy avoided little technical recession, tariffs imposed on Mexican products, a reduced budget and geopolitical uncertainties will continue to press the country’s finances and impact weight.
TECHNICAL PERSPECTIVE OF USD/MXN: The Mexican weight loses impulse as the USD/MXN is consolidated
The USD/MXN has a bearish trend, although sellers have failed to drag the exchange rate below the minimum of the year to date (YTD) of 19.46. This suggests a lack of strength of the bassists, clearing the way for a recovery.
The impulse remains bassist, however, the flat slope of the relative force index (RSI) confirms the consolidation ahead.
If the USD/MXN falls below 19.46, the following support would be the psychological figure of 19.00. On the contrary, if the USD/MXN rises above 19.78, a 200 -day SMA test is expected in 19.98. A rupture of this last will expose the mark of 20.00.
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.
