The Mexican Peso saw some recovery against the US Dollar on Friday, but is expected to end the week with over 2% losses. The Federal Reserve’s Personal Consumption Expenditures (PCE) Price Index showed steady inflation, sparking expectations of a Fed rate cut in September. Talks of judiciary reform in Mexico starting on August 1 have also raised economic and political concerns.
The US dollar weakened against the Mexican Peso as Wall Street posted gains, with the greenback falling over 0.12%. Inflation data in the US showed some signs of stability, leading analysts to predict a potential policy easing by the Fed in September. The CME FedWatch Tool shows a 100% chance of a 25-basis point cut in the September meeting.
Mexican mid-month inflation data could deter the Bank of Mexico from easing policy, with analysts predicting annual inflation to end at 4.30%. Economic growth in Mexico is expected to slow, with a growth rate of 1.9% projected for the year. The US PCE in June rose by 0.1% MoM and 2.5% YoY, while the University of Michigan Consumer Sentiment survey missed projections.
Technical analysis shows the USD/MXN pair to be upward biased, with the Peso strengthening but the trend remaining positive. The MXN is influenced by various factors such as the Mexican economy, interest rates set by Banxico, foreign investment, remittances, and geopolitical trends.
The Mexican Peso is influenced by the performance of the Mexican economy, central bank policy, foreign investment, remittances from abroad, nearshoring trends, and oil prices. Banxico’s main objective is to maintain low and stable inflation levels by setting appropriate interest rates. Macroeconomic data releases are crucial in assessing the Mexican economy, with strong economic indicators benefiting MXN.
As an emerging-market currency, the Mexican Peso tends to perform well during risk-on periods when market risks are low. In times of market turbulence or economic uncertainty, the Peso may weaken as investors seek safe havens. Overall, the Mexican Peso is affected by a combination of domestic and global factors that shape its value in the foreign exchange market.
