- The Mexican weight cuts losses after Trump signals about “low and fair” tariffs and possible renegotiation of the T-MEC.
- The US trade deficit is extended more than expected, pressing the US dollar before the Fed policy decision.
- The operators observe the publication of the IPC of Mexico on May 8 in search of clues about the next movement of Banxico.
The Mexican peso regained land on Tuesday against the US dollar while the operators would say the latest figures of the United States trade balance (USA), which showed that the commercial deficit was extended. A scarce economic agenda in Mexico keeps operators waiting for the publication of inflation figures and the Monetary Policy meeting of the Federal Open Market Committee (FOMC) of the USA on Wednesday. At the time of writing, the USD/MXN is quoted at $ 19.67, with a fall of 0.08%.
The appetite for the risk remains depressed before the FOMC meeting. The US business policies continued to monopolize the holders, since US President Trump said he is open to impose low and fair tariffs on partners who seek to avoid greater taxes. He added: “It will be a very fair number, it will be a low number. We are not looking to harm the countries.”
Trump added that he is willing to start conversations to renegotiate the Free Trade Agreement T-MEC at a meeting with Canadian Prime Minister Mark Carney.
The Mexican weight shot after Trump’s comments, with the USD/MXN by cutting previous profits and becoming negative in the day. Meanwhile, the operators expect the publication of the consumer price index (CPI) of Mexico on May 8. This follows a slight increase in the inflation report in mid -April, which showed an increase in prices, although it remained within the inflation target of 3% or so 1% of the Bank of Mexico (Banxico).
The US trade balance revealed that the US deficit was extended more than expected, according to the US Department of Commerce.
Daily summary of market movements: the Mexican weight can be seen modestly before the Fed meeting
- USD/MXN operators are waiting for the next decision of the Federal Reserve. If the Fed keeps unchanged rates, the interest rates differential will remain unchanged. However, if Mexico’s inflation decreases, according to the data of May 8, the expectations that Banxico reduces indebtedness costs at 50 basic points (PBS) on May 15 would increase.
- The CITI Mexico expectations survey shows that most analysts estimate that Banxico will cut rates in 50 PBs.
- The US Department of Commerce revealed that the commercial balance was -140 billion dollars higher than expected, at -137 billion dollars, and exceeded -123.2 billion dollars in February.
- Although the last figures of the Gross Domestic Product (GDP) of Mexico surprised the markets, with the economy dodging a technical recession, tariffs imposed on Mexican products, a reduced budget and geopolitical uncertainties will continue to stress the country’s finances and influence weight.
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. Recently, the exotic pair failed to overcome the simple mobile average (SMA) of 20.78, indicating that sellers are in the short term. The impulse of the buyers seems to be fading, as indicated by the relative force index (RSI), which suggests that consolidation is coming.
If the USD/MXN exceeds the minimum of the year to date (YTD) of 19.43, this could pave the path to the psychological figure of 19.00. In case of greater weakness, the following support would be the maximum of June 28 converted into a support in 18.59.
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 level 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.
