- The USD/MXN continues to recover after bouncing since 18.66, its lowest level since August 2024.
- The Mexican weight faces challenges after the disappointing economic data of the manufacturing PMI of Mexico.
- The US dollar can be seen due to the signals of improvement in the US manufacturing activity in June.
The USD/MXN advances slightly for the second consecutive day, extending its recovery after bouncing since 18.66, the lowest level since August 2024, recorded on July 1. The pair is quoted around 18.70 during the European hours on Wednesday.
The increase in the USD/MXN torque could be attributed to the weakening of the Mexican weight (MXN), promoted by the latest disappointing economic data of Mexico. Real retail sales remained flat at 0% year -on -year in May, compared to an expected increase of 0.8% and an earlier reading of 0.9%.
The purchasing managers index (PMI) of Global S&P of Mexico fell to 46.3 in June, compared to the previous reading of 46.7. Reading marked the weakest quarterly average since the beginning of 2021, highlighting a strong drop in new orders, since companies cited a weak demand, project delays and the effects of US tariffs.
The USD/MXN torque can be seen as the US dollar (USD) gains ground, driven by the signs that economic activity in the United States manufacturing sector (USA) improved in June. The US employment change report for June will be at the Care Center later on Wednesday.
On Tuesday, the Report of the Supply Management Institute (ISM) showed that the US manufacturing PMI rose to 49.0 from 48.5 in May, exceeding market expectations of 48.8. In addition, US Jolts job offers increased to 7.76 million in May, compared to 7,395 million offers reported in April. This figure exceeded the expectation of the market of 7.3 million.
Mexican peso – frequent questions
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.
