- The Mexican weight drives USD/mxn towards the figure of 20.00.
- Uncertainties on tariffs persist, but the performance advantage keeps weight attractive.
- The US CPI data is softer than expected, increasing bets on Fed rates cuts and enhancing MXN attraction.
- Mexico’s Minister of Finance recognizes economic slowdown in commercial tensions; Industrial data are observed.
The Mexican pesos (MXN) is recovered against the US dollar (USD) on Wednesday, since the latest inflation report in the United States (USA) could force the Federal Reserve (FED) to reduce indebtedness costs, thus expanding the differential of interest rates between Mexico and the US at the time of writing, the USD/MXN pair quotes at 20.19 0.35%.
The economic agenda of Mexico is still absent, with the operators waiting for the publication of industrial production figures. However, the data has passed to the background while US commercial policies boost financial markets.
Today, USA began applying 25% tariffs to aluminum and steel imports worldwide, without exceptions, including Mexico. Mexican president Claudia Sheinbaum said she would expect a resolution in the coming weeks, adding: “We will wait until April 2 and from then on we will see if our definition of reciprocal tariffs will also be applied.”
Mexico’s Minister of Finance, Edgar Amador Zamora, said the national economy is expanding, but shows signs of deceleration linked to commercial tensions with the US.
The US Labor Statistics Office (BLS) revealed that consumer inflation in the US was below estimates in general and underlying figures. Although this is a relief for the Federal Reserve (Fed), the concerns that tariffs could be prone to inflation will probably keep the Fed in waiting mode while evaluating their impact on monetary policy.
In addition to this, Fed officials will be attentive to the publication of the Producer Price Index (IPP) on Thursday, since some of their data are used to calculate the Personal Consumption Pricing Index (PCE).
What moves the market today: the Mexican peso rises by a weak US dollar
- The data in Mexico show that the economy is slowing down, with private economists estimating a growth of 0.81%, according to an February survey of the Bank of Mexico (Banxico). This and a consumer trusted trusted report on Monday suggest that Banxico could reduce interest rates at the next March 27 meeting.
- According to Reuters, the president of Mexico said Wednesday that the country’s government will not use its open credit line with the International Monetary Fund (IMF), adding that current economic challenges do not yet require financing from the lender.
- The US Consumer Price Index (CPI) rose 0.2% intermensual in February, below the expected 0.3%. In interannual terms (yoy), inflation was reduced from 3.0% to 2.8%.
- The underlying IPC, which excludes volatile food and energy prices, increased an intermencing 0.2%, slowing down from January 0.4% and being below forecasts. In the last twelve months, the underlying IPC decreased from 3.3% to 3.1%, indicating additional disinflationary progress.
- Future operators of the money market had discounted 74 basic states of relief by the Federal Reserve (FED) towards the end of the year.
- A Reuters survey showed that 70 of 74 economists say that the risk of recession has increased in the US, Canada and Mexico.
- In the operating room, commercial disputes between the US and Mexico are still the center of attention. If countries reach an agreement, you could pave the way for a recovery of the Mexican currency. Otherwise, a greater increase in USD/MXN is expected, since US tariffs could trigger a recession in Mexico.
Technical perspective of the USD/MXN: The Mexican weight shoots while the USD/MXN falls below 20.20
The USD/MXN finally broke below the figure of 20.20, which opens the door to test the figure of 20.00, since the vendors push the price in cash below the simple mobile average (SMA) of 100 days in 20.22. If the torque falls below 20.00, sellers could challenge the 200 -day SMA in 19.62.
On the contrary, if the USD/MXN rises above the 100 -day SMA, buyers could be tempted to challenge the 50 -day SMA in 20.47. Once surpassed, the 20.50 mark will be the following.
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.
