- Mexican peso appreciates, Dovish Bannico Trut, reduces weak economic approach.
- Mexico’s December retail sales exceeds estimates but are slow from the earlier month.
- Banxxico repetition of minutes, highlighting progress on disintegration.
- Q4 GDP Final Reading on Friday expected to confirm the economic recession.
Mexican Peso staged a comeback, exceeding 0.23% against Greenback. Retail sales in December exceeded estimates, yet they lagged behind the figures of the previous month. After killing the daily high of 20.46, the USD/MXN trades at 20.39.
The Economic Dock of Mexico revealed that consumer expenses were submerged as compared to November data, but exceeded the pessimistic expectations of private economists. Meanwhile, Banco D Mexico (Bannico) revealed the minutes of its latest meeting, re -confirmed the dowish trend of the Mexican Institute, and suggested that the front rate cuts are eyes.
On Wednesday, Bancico revealed its quarterly report for Q4 2024, in which the Central Bank revised its development forecast for 2025. In addition, the bank expects weak consumption and personal expenses, which reflects a highly uncertain environment.
Regarding cutting their 50basis-point rate in the latest monetary policy decision, the Governing Board stated that they are comfortable with the level of existing inflation. This highlighted the progression of the disruptive process.
On Friday, the Instituteo National Day Estodistic Gographia E Informatica (INEGI) will have the final GDP reading facility for Q4 2024, which is expected to show a quarterly contraction and is an annual detail.
Daily Digest Market Movers: Mexican Peso Climbing, Shocked by weak economic outlook
- The latest minutes of Bannico admitted that the risks of development are bent downwards. The governing board hopes that the economy will grow 0.6% in 2025, which is below 1.2% already. The forecast is below the survey of 2.3% of the Ministry of Finance of Mexico and below the survey of city expectations of 1%.
- For 2026, Bannico estimates that Mexico’s economy will increase by 1.8%.
- Mexico’s retail sales increased by 0.1% mother, which is estimated for shrinkage -0.4% shrinkage. On an annual basis, sales improved from -1.9% contraction to -0.2% yoy.
- Mexico President Claudia Shinbam said that Marcello Ebard, secretary of the Mexico economy, will meet the US Commerce Secretary today about Tariff.
- The deviation of monetary policy between Bannico and Fed is further USD/MXN reverse. The fed is expected to keep the rates stable, while in the next meeting, Bansico is being cut down again by 50 basis points.
- UsD/MXN is moving forward due to weakness in greenback. The US dollar index (DXY) fell 0.65% to 106.45.
- Trade disputes between the US and Mexico remain in front and centers. Although countries first got common land, USD/MXN traders should know that there is a 30-day stop and tension may arise in late February.
USD/MXN Technical approach: Mexican peso is stable as the USD/MXN is below 50-day SMA
The USD/MXN continued to consolidate under the 50-day simple moving average (SMA), keeping the bulls in the check. Further weaknesses can run the exchange rate below the 100-day SMA at 20.22 and a psychologist may threaten to challenge 20.00 figures. If the approval is given, the next support will be on October 18, 2024 less 19.64, ahead of the 200-day SMA at 19.37.
Conversely, if the USD/MXN moves beyond the 50-day SMA, then move beyond the 20.50 points.
Banskozo fix
Bank of Mexico, also known as Bannico, is the central bank of the country. Its mission is to preserve the value of Mexico’s currency, Mexican Peso (MXN), and determine monetary policy. To end this, its main objective is to maintain low and stable inflation within the target levels – close to its target of 3%or, between 2%and 4%, the middle point in a tolerance band.
The main tool of Bannico to guide the monetary policy is by determining interest rates. When inflation is above the target, the bank will try to increase the rates to control it, making it more expensive to borrow money for homes and businesses and thus cool the economy. High interest rates for Mexican peso (MXN) are usually positive because they cause high yields, making the country a more attractive place for investors. Conversely, the low interest rate weakens MXN. The rate difference with USD, or how Bannico is expected to determine interest rates compared to the American Federal Reserve (Fed), is an important factor.
Banxico is found eight times a year, and its monetary policy is greatly affected by the decisions of the American Federal Reserve (FED). Therefore, the Central Bank’s decision -making committee usually assembles a week after the Fed. In doing so, Bannico reacts and sometimes estimates monetary policy measures prescribed by the Federal Reserve. For example, after the Kovid -19 epidemic, before the Fed rates, Bannico first did it first to reduce the possibility of adequate depreciation of Mexican Peso (MXN) and prevent capital outflows that destroy the country.
