- The Mexican weight can be seen while the USD/MXN immerses itself by 20.00 in the mid -relaxation expectations of the Fed.
- The weak industrial production data in Mexico were overshadowed for an improvement in the appetite for risk, driving MXN against the weakest dollar.
- Tariff tensions between the US and Mexico intensify; Mexican officials confirm ongoing discussions before the critique of tariff deadline on April 2.
The Mexican peso (MXN) is rising sharply against the US dollar (USD) on Thursday, since operators seem confident that the Federal Reserve (Fed) could lower interest rates three times in 2025. Positive inflation and employment reports in the United States (USA) led operators to anticipate an additional relaxation, which weighed on the US dollar. The USD/MXN is quoted at 20.08, with a fall of 0.44%.
Mexico’s data were worse than expected, since industrial production in January fell. However, a slight improvement in the appetite for risk keeps the weight of emerging markets (EM) appreciating while the dollar continues to reduce previous losses.
Meanwhile, Mexico’s Minister of Economy, Marcelo Ebrard, said that the governments of Mexico and the US were having intensive conversations about the threat of imposing a 25% tariff on all the assets of their commercial partner number 1 for April 2.
On Wednesday, 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.
On the other side of the border, US data revealed that inflation at the door of the factories remained without changes mainly, although Goldman Sachs revealed that some of the inflation measures used to calculate the Fed preferred inflation indicator, the Personal Consumption Expenditure Price Index (PCE), could support the latter.
Based on the CPI and the IPP, the US investment bank revealed that the estimates of the February underlying PCE increased 0.29%, corresponding to an year -on -year reading of 2.7%.
Other data showed that the labor market is still solid, although most economic data continue to be moderate amid the commercial rhetoric of US President Donald Trump.
What moves the market today: the Mexican weight is not affected by the discouraging industrial production data
- The industrial production of Mexico fell -0.4% intermensual in January, below the forecasts of an expansion of 0.2%. In the twelve months until January, production collapsed -2.9% year -on -year, failing to improve at -1.8%, worse than the fall of -2.7% of December.
- The economy in Mexico is slowing dramatically, as private analysts projected by the Bank of Mexico (Banxico), who expect a growth of 0.81%. The evolution of the disinflation process and a stagnant economy push Banxico to reduce financing costs at the next March 27 meeting.
- The US Production Price Index (IPP) of February was softer than expected, increasing 3.2% year -on -year, below the 3.3% forecast and lowering 3.7% of the previous month.
- The underlying IPP, which excludes volatile elements, increased by 3.4% year -on -year, failing to reach 3.5% estimates and decreasing 3.6% of January.
- Despite the recent colder inflation reports than expected, economists warn that tariffs on US imports could trigger a new inflation increase in the coming months.
- Meanwhile, the initial unemployment subsidy applications for the week that ended on March 8 decreased slightly to 220k, exceeding 225K expectations and improving from the previous 222K reading.
- Future operators of the money market had anticipated 74 basic relaxation points 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 machine 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 20.10
The USD/MXN went from a neutral trend to a biased downward, with sellers pointing to a test of the psychological figure of 20.00. A rupture of the latter will pave the way to test the simple mobile average (SMA) in 19.63 before falling to 20.50. On the contrary, a clear rupture above 20.20 could keep the exotic pair once again within the range of 20.20 – 20.50 before buyers can challenge the peak of 20.99 of March 4.
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.
