- The Q4 GDP of Mexico contracts for the first time after 2021.
- Banxico slashed the 2025 development approach to 0.6%under the estimates of the Ministry of Finance.
- US data mixed: PMI manufacture improves but services come in PMI contraction.
Mexican Peso (MXN) on Friday lost some grounds against the US Dollar (USD) as the Mexican economy disintegrated in the last quarter of 2024. This indicates that the outlook is not as promising amidst the atmosphere of uncertainty associated with the United States as not as expected (US) President Donald Trump’s business policies. The USD/MXN trades at 20.41, records a profit of 0.54%.
The first time since the third quarter of 2021 was contracting Mexico’s economy in Q4 2024, revealing the Statistics Agency Inegi. The GDP matched the estimates on the quarterly basis and submerged compared to the forecast on the previous reading and annual basis.
Banko D Mexico (Bannico) hopes that development will slow down 0.6%this year, as the latest meeting is detected in minutes of the meeting. The governing board hopes that the economy will increase by 0.6% in 2025, 1.2% below before, below the estimate of 2.3% of the Ministry of Finance of Mexico and below the city expectations of 1%.
Given the background, the USD/MXN shows the pair and reverse. S&P Global revealed that manufacturing activity in the United States improved. Meanwhile, PMI entered the contraction sector for the first time since January 2023.
Other figures have shown that the sale of the existing house collapsed and the University of Michigan (UOM) for February deteriorated the final reading.
Daily Digest Market Movers: Mexican Peso Heavy, Economy is projected to underperform the economy
- GDP (GDP) shrunk from -0.6% QOQ in the fourth quarter of 2024, below 1.1% detailed and matched the estimates of a reciter pole.
- On annual terms, Mexico’s economy increased 0.5% in Q4 compared to 2023 data. The increase for the whole year was 1.2%, its worst annual number since 2020.
- 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, Bannico is designed to cut rates again from 50 basis points.
- At the time of writing, US President Donald Trump repeated a 25% tariff on cars, which was effective on 2 April.
- 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 falls as USD/MXN
The USD/MXN pair does not present a sudden change, in which the trend is slightly vomiting. After going down near the 100-day simple moving average (SMA) at 20.23, buyers pushed the pair upwards. Nevertheless, 20.40 lightens resistance, the foreign pair maintains trading sideways.
If the USD/MXN cleans 20.40, the next resistance will be 20.50, followed by a mark of 17 January 20.93. On further strength, the next major resistance levels are 21.00 and the year-by-year (YTD) high 21.28. Conversely, if the pair moves below 20.23, the 20.00 figure is forward. Violation of the latter exposes October 18, 2024, low at 19.64, 200-day SMA at 19.37.
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 nearly, 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.
