- The Mexican weight ignores the weak data and extends its four -day rally while the traders observe the meeting between the US and China in Switzerland.
- Consumer confidence in Mexico falls for the seventh month; Automobile exports collapse under the new US tariffs.
- Fed officials maintain a waiting and see approach, highlighting uncertainty about the impact of tariffs on the US economy.
The Mexican peso (MXN) recorded modest profits against the US dollar (USD) on Friday, since market participants became cautious before conversations between the US and China in Switzerland. The emerging market currency (EM) remained indifferent to a worse economic scenario than expected, since Mexico’s data continued to deteriorate.
At the time of writing, the USD/MXN is quoted in 19.46, below its opening price at 0.33%, testing the minimum of the year to date (YTD).
The consumer’s confidence in Mexico, according to the National Institute of Statistics, Geography and Informatics (INEGI), showed that households have become pessimistic about the panorama in April. The figures fell 46 to 45.3 for seventh consecutive month.
Other data revealed by INEGI included car production and exports, with both decline figures due to new US tariffs on cars, which impacted production and led to a reduction in shipments to the US.
Despite publishing discouraging economic data, the weight was strengthened with the USD/MXN falling for the fourth consecutive day.
On the other side of the border, the Federal Reserve officials (FED) made holders. They emphasized that current monetary policy is appropriate and that the Central Bank needs to wait and see how tariffs impact the US economy.
What moves the market today: weakness in the automotive industry will weigh on Mexican weight
- Automobile production collapsed 9.1% in April, compared to an increase of 12.1% the previous month. Among the main brands that reduced their production are Stellantis, with a drop of -46.7%, followed by BMW with -27.1%.
- Mexican car exports in April fell by -10.9% after an increase of 3.8% in March, INEGI revealed. Mazda and Volkswagen experienced decreases from -60.9% and -44.4%, respectively, in exports.
- The inflation data of Mexico in April increased by 3.93% year -on -year, above 3.90% forecasts. Basic prices increased 3.93%, from 3.64%, above 3.92%estimates.
- The traders approach moved to the Monetary Policy Meeting of the Bank of Mexico (Banxico) on May 15. The economists surveyed by CITI expect a rate of rates of 50 basic points (BPS) by the Mexican institution, backed by the last policy statement revealed by the Central Bank.
- 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 the USD/MXN: The Mexican peso recovers strength while the USD/MXN proves the minimum of the year
The USD/MXN is testing the minimum of the year to date, however, sellers are colliding with buyers while market participants prepare for the weekend. A daily/weekly closure below 19.50 could exacerbate a movement towards the figure of 19.00.
The relative force index (RSI) favors sellers, indicating that there is additional weakness ahead.
On the contrary, if buyers raise the USD/MXN above 19.59, the following resistance would be the simple mobile average (SMA) of 20 days in 19.66, followed by the 200 -day SMA in 19.99 before the 50 -day SMA at 20.02.
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.
