The Mexican Peso has seen a significant depreciation against its most traded pairs this week, with losses ranging from 4.0% to 6.0%. Weakness in the Peso has been driven by cooler inflation data in Mexico, weaker retail sales, and concerns over proposed changes to the Mexican constitution. Additionally, the unwinding of the carry trade, where investors borrow in a currency with low interest rates to invest in a currency with higher rates, is also contributing to the Peso’s decline.
The Peso is trading at 19.49 against the US Dollar, 21.69 against the Euro, and 25.57 against the Pound Sterling. It has weakened the most against the Pound Sterling, which has been supported by positive UK data. Despite lackluster data from the Eurozone, the Peso has also fallen against the Euro. Against the US Dollar, the Peso has seen surprise losses despite the Dollar itself hitting year-to-date lows.
Technical analysis shows that USD/MXN is continuing to rally within a rising channel, with a potential target of 20.50. The overall trend for the pair is bullish, providing support for further upside movement. The Mexican Peso’s value is influenced by various factors, including the performance of the Mexican economy, central bank policy, foreign investment levels, remittances, and geopolitical trends. The central bank’s objective is to maintain inflation at low and stable levels, which can affect interest rates and in turn, the value of the Peso.
Macroeconomic data releases are important for assessing the state of the Mexican economy and can impact the Peso’s valuation. A strong economy with high growth, low unemployment, and high confidence is positive for the Peso, attracting more foreign investment. As an emerging-market currency, the Peso tends to perform well during risk-on periods when market risks are low, and weaken during times of market turbulence or economic uncertainty. Ultimately, the Mexican Peso’s value is influenced by a combination of domestic and international factors, making it important to monitor economic data and geopolitical developments when trading the currency.
