- Mexican Peso downed more than 1%, below 19.90 as USD/MXN.
- Peso reduces the weak industrial production of Mexico and promotes a decline in consumer confidence.
- The US consumer sentiment is powered by the upcoming Trump administration tariff, amid growing inflation expectations.
Mexican Peso (MXN) rally against the US Dollar (USD) on Friday, ignoring the soft-to-intake economic figures that surfaced during the week, that the economy could slow down. The decline of consumer spirit in the United States (US) increased pressure on greenback, which is ready to finish the week with damage. The USD/MXN trades at 19.86, which is more than 1%.
The market mood bounced a tailwind for the emerging market currency. Consumer confidence in Mexico and disappointing report in industrial production depicts a sad economic outlook, which is confirmed by the Banco de Mexico (Banansico), Director of Economic Research, Alejandarna Saledo Sisneros.
He commented that uncertainty is affecting the country’s business, pointing to an approach to a liberal expansion of regional economies. Banansico estimated economic contractions in all regions of the country. The seasonally adjusted data declined by nationwide, development -0.6 % in Q4 compared to the previous quarter.
In the US, the University of Michigan (UOM) Consumer Affairs Index recorded a disappointing print, while the expectations of inflation were more due to the tariff of US President Trump.
Traders’ eyes are on next week’s Federal Reserve (Fed) policy decision. Last Friday, Fed Chair Zerome Powell revealed that “the market measures for inflation have moved forward, run by tariffs.”
Next week, traders will look into retail sales, housing data, monetary policy decisions and economic estimates.
Daily digest market mover
- Industrial production of Mexico falls to -2.9% yoy, a decline on consumer confidence worse than December -2.7% may cause depreciation despite the ongoing benefits to Mexican Peso, which is mostly seen due to a weakness of US dollar.
- The economy in Mexico is slowing down rapidly as Banco is estimated by private analysts provided by D. Mexico (Bannico). They expect an increase of 0.81%.
- Bannsico is expected to continue the policy easily in the meeting of 27 March in the meeting and the growth of a stable economy.
- On Wednesday, Mexican Finance Minister Edgar Amdor Zamora said the national economy is expanding, but the trade with the US shows signs of slowing down.
- The University of Michigan (UOM) Consumer Survey revealed that in March, below the 63.1 forecasting, Bhavna deteriorated from 64.7 to 57.9. In particular, the hopes of inflation jumped with Americans to see 12 months of inflation growing from 4.3% to 4.9%. Over a period of five years, consumers saw prices rising by 3.5%above 3.5%.
- Money Market Futures Traders was priced at 67 base points of ease by Fed at the end of the year, below 74, below 74 a day earlier.
- A Reuters Polls revealed that 70 out of 74 economists say the risk of recession has increased in the US, Canada and Mexico.
- In the boiler room, trade disputes between the US and Mexico remain in front and centers. If the countries reach an agreement, it can pave the way for the recovery of the Mexican currency. Otherwise, USD/MXN is seen inverted further as American tariffs can trigger a recession in Mexico.
USD/MXN Technical Outlook: Mexican falls below 20.00 as PESO USD/MXN
The USD/MXN finally approved the 20.00 figure by hitting the fourth month low of 19.84 during the North American season. Momentum is a more negative aspect on the pair shown by the relative strength index (RSI), which replaces the recession and is closed in oversold territory. Therefore, at least the path of resistance is tilted in the negative side.
USD/MXN will be the first support at 19.67 by 200-day simple moving average (SMA). If crossed, the next stop will be the 19.50 figure, which is from the low of 19.06 from September 18. To resume fast, the first roof level of the pair is 20.00. A decisive break will highlight the 100-day SMA at 20.35.
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.
