The Mexican Peso has shown stability against the US Dollar due to solid April Retail Sales data, but political uncertainty surrounding AMLO’s judiciary reforms has limited further gains. President-elect Sheinbaum is expected to make key announcements regarding her cabinet members. The US housing sector has weakened, along with softer jobs data, as highlighted by Federal Reserve speaker Kashkari suggesting disinflation may take a year or two.
The Mexican Peso has experienced gains against the US Dollar, with the USD/MXN exchange rate at 18.30, down 0.56%. Solid Retail Sales data in April has exceeded expectations and previous figures, demonstrating the strength of Mexico’s economy. President-elect Sheinbaum is set to announce her cabinet members, including Marcelo Ebrard’s Casaubon as Economy Minister. However, political uncertainty remains due to ongoing judiciary reform discussions.
Despite political noise regarding AMLO’s reforms, the USD/MXN exchange rate has stabilized around 18.40-18.50. However, this stability may be short-lived as the new Mexican Congress is set to begin on September 1. On the US front, the housing sector continues to show weakness and softer jobs data have emerged. Minneapolis Fed President Neel Kashkari has indicated that lowering core inflation to 2% may take a year or two.
Mexican Retail Sales in April have increased, exceeding estimates and projections. The USD/MXN exchange rate stabilized following verbal intervention by Banxico Governor Rodriguez Ceja, stating the central bank’s readiness to restore order in markets. US Initial Jobless Claims for June 15 exceeded estimates, while Building Permits and Housing Starts dropped. The CME FedWatch Tool shows odds of a 25-basis-point Fed rate cut at 58%.
Technical analysis shows the USD/MXN consolidating within the 18.30-18.50 range, with bullish momentum supported by the Relative Strength Index (RSI). A breach of 18.50 could lead to a retest of the year-to-date high of 18.99. On the downside, a break below the April high of 18.15 could keep the pair within the 18.00-18.15 range. The Mexican Peso is influenced by various factors, including economic performance, central bank policy, foreign investment, remittances, geopolitical trends, nearshoring, and oil prices.
Banxico’s main goal is to maintain low and stable inflation levels, adjusting interest rates accordingly. Macroeconomic data releases play a crucial role in assessing the economy’s state and impacting the Mexican Peso’s valuation. As an emerging-market currency, the Mexican Peso tends to perform well during risk-on periods but weakens during market turbulence or economic uncertainty. The strength of the Mexican economy, coupled with high economic growth, low unemployment, and confidence, can attract foreign investment and potentially lead to interest rate hikes.
