The Mexican Peso (MXN) is experiencing a recovery due to optimism surrounding incoming-President Claudia Sheinbaum’s cabinet picks. With higher interest rates in Mexico expected to attract foreign capital, the Peso continues to strengthen. Despite positive US flash S&P Global PMI data for June benefiting Dollar-pairs, USD/MXN remains stable at the current rate of 18.20 Pesos per US Dollar.
Sheinbaum’s announcement of six cabinet ministers, including Marcelo Luis Ebrard Casaubón as the Economy Minister, has instilled confidence in investors. Ebrard Casaubón, a seasoned government administrator, will focus on trade agreements and increasing foreign investment. Other prominent appointments include Juan Ramón de la Fuente as the Secretary of Foreign Affairs and Alicia Bárcena as the Secretary of Environment and Natural Resources, among others.
The relatively high interest rates in Mexico, at 11.00%, make it an attractive currency for investors engaging in the carry trade. This investment strategy involves buying currencies with high interest rates, like the Mexican Peso, and borrowing in currencies with lower rates. Analysts anticipate that Banxico will maintain rates unchanged in July, supporting the Peso amidst political noise and fiscal uncertainty.
In terms of technical analysis, USD/MXN is correcting lower after reaching a peak on June 12. While the short and medium-term trends remain bullish, a break above 18.68 could signal further upside towards 19.22. Conversely, a break below 18.20 may indicate a more bearish tone in the short-term. The long-term trend remains uncertain following previous bearish momentum.
Frequently asked questions about the Mexican Peso shed light on the factors influencing its valuation, such as economic performance, central bank policy, foreign investment, remittances, geopolitical trends, and oil prices. Banxico aims to maintain stable inflation levels through interest rate adjustments. Macroeconomic data releases and market sentiments also impact the Peso’s strength, as it tends to thrive during risk-on periods and weaken in times of economic uncertainty. Overall, the Mexican Peso remains resilient due to its attractive interest rates and positive market outlook.
