- The Mexican peso remains firm, driven by a weaker dollar after the approval of the Trump Tax and Expenses Law project by the US Chamber of Representatives.
- The commercial data of Mexico and the Fed comments before the US housing data remain key to the USD/MXN in the short term.
- The Usd/MXN bears are still in control, with the May minimum, demonstrating to be the next technical obstacle.
The Mexican peso (MXN) benefits from the renewed weakness of the US dollar (USD) on Friday, promoted by concerns on the health of the United States deficit (USA) after the US Chamber of Representatives of the United States votes in favor of the Trump Administration Tax and Expenses bill.
As investors evaluate the impact of the bill on US debt load, the perspectives of future growth and interest rates, the USD/MXN is maintained below the previous psychological support in 19.30, which is providing immediate resistance at the time of writing.
Fed Comments and Commercial Data of Mexico will boost volatility
The data of the trade balance of Mexico published on Friday showed a deficit of 0.088 billion dollars, less than 0.16 billion predicted by analysts. The report, published by the National Institute of Statistics and Geography of Mexico (INEGI) monthly, reflects the difference between exports and imports from a country. Despite registering a narrower commercial deficit than expected, it still represents a change with respect to the surplus of 3,442 billion dollars reported in March.
For the United States (USA), the speakers of the Federal Reserve (FED) will continue to provide comments on the expectations of interest rates. Investors will be closely monitoring comments in search of signs of any change in when the Fed could cut interest rates.
At 14:00 GMT, housing data will be published, which will reflect the demand for housing in April, received as an advance indicator of spending and credit demand.
Daily summary of the Mexican peso: US fiscal concerns persist.
- Fiscal concerns around the approval of the Trump tax bill have increased. The “great and beautiful bill” is expected to increase the federal US deficit by 3.8 billion dollars during the 2026-2034 period, according to the US Congress Budget Office.
- The recent qualification reduction by the Moody’s agency, combined with President Trump’s tax bill, has weighed over the US dollar. A qualification reduction reflects a reduced faith in which the US can pay your debt.
- The speakers of the FED on Friday include the president of the Fed of St. Louis, Alberto Musalem, the president of the Fed of Kansas City, Jeff Schmid, and the governor Lisa Cook, who are all voters of the Fed.
- The CME Fedwatch tool indicates a 94.7% probability that interest rates are maintained in the current range of 4.25% -4.50% in June, without analysts by waiting for any Fed rates cut until September.
- With the Bank of Mexico (Banxico) cutting the interest rates at 0.50% at its May meeting, the divergence in the differential of interest rates between the two countries should support the demand of the USD.
- However, on Thursday, the inflation data of the first fortnight of Mexico came higher than expected at 0.09%, reflecting an increase in price pressures.
- Thursday’s data also showed that the Gross Domestic Product (GDP) of Mexico grew 0.2% in the quarter and 0.8% in the year, in line with market expectations.
- With the economy considered resistant despite the increase in tariffs by the US, this could reduce the pressure on Banxico to continue cutting rates in the short term.
Technical analysis of the Mexican peso: USD/MXN trades about 19.30
The USD/MXN remains about 19.30, quoting below the simple mobile average (SMA) of 10 days and 20 days at the respective levels of 19.39 and 19.49. With a rupture above 19.30 that could put these levels at stake, a movement below would suggest that sellers are in control of the trend.
The relative force indicator (RSI) is 37.77, showing that the downward impulse is firm.
If the downward trend is maintained, a new proof of the minimum of May 19.23 would bring to the minimum of October 19.11, with the following support layer at the next psychological level of 19.00.
USD/MXN daily graphics
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.
