The Mexican Peso saw a gain of 0.55% as it traded at 17.92, rebounding after experiencing losses the previous week. This recovery was driven by better-than-expected economic activity data in Mexico. In May, economic activity surpassed estimates and outperformed April’s figures, signaling growth in the economy. However, retail sales for the same period showed slower growth, indicating that government infrastructure projects are the main drivers of economic activity in the country.
The endorsement of Kamala Harris by Joe Biden in the US presidential race impacted the market sentiment positively. US equity futures opened higher during the Asian session and Wall Street traded in the green, leading to the appreciation of high-beta currencies such as the Mexican Peso. On the other hand, comments from former President Donald Trump regarding Mexico potentially closing the border and taking back the automotive industry could weaken the Mexican Peso by deterring companies from relocating to the country.
The USD/MXN pair dropped below 18.00, and technical analysis suggests a possible correction before a continuation of the upward trend. Momentum shifted bearishly with the Relative Strength Index (RSI) around the 50-neutral line. If the pair drops further below the 50-day Simple Moving Average (SMA) at 17.72, the next support levels could be tested. On the other hand, if the USD/MXN extends its gains above the psychological 18.00 figure, key resistance levels could be targeted to aim for higher levels.
The Mexican Peso, being the most traded currency among its Latin American peers, is influenced by various factors such as the performance of the Mexican economy, central bank policy, foreign investment, remittances, and geopolitical trends. The central bank’s objective is to maintain low and stable inflation levels, with interest rates adjusted accordingly. Macroeconomic data releases play a crucial role in assessing the state of the economy and impact the valuation of the Mexican Peso. As an emerging-market currency, the Mexican Peso tends to perform well during risk-on periods and weakens during market turbulence or economic uncertainty.
Overall, the Mexican Peso’s recovery was fueled by positive economic data and favorable market sentiment due to US political developments. However, ongoing factors such as comments from former President Trump and economic uncertainty could pose risks to the currency’s stability. Monitoring key support and resistance levels, as well as macroeconomic indicators, will be essential in understanding the future performance of the Mexican Peso in the forex market.
