- Analytics
- News and Tools
- Market News
- Mexican Peso retreats despite boost in business confidence, amid risk aversion
Mexican Peso retreats despite boost in business confidence, amid risk aversion
- Mexican Peso erases last Friday’s 0.70% gains on risk aversion.
- Mexico’s Consumer Price Index (CPI) for the 12 months to September will be the highlight of the economic agenda for the next week.
- USD/MXN is forming a bullish-engulfing candlestick chart pattern, which could exacerbate a rally to the 200-day SMA.
The Mexican Peso (MXN) weakened versus the US Dollar (USD) during the North American session on Monday due to some risk aversion, with market participants awaiting a speech by the US Federal Reserve (Fed) Chairman Jerome Powell later in the day. Although there was a slight improvement in Mexico’s Business Confidence, the USD/MXN reclaimed the 17.50 area, posting gains of 0.70%.
Business Confidence in Mexico rose slightly to 53.8 in September from 53.7 in August, revealed the Instituto Nacional de Estadistica Geografia e Informatica (INEGI). The data showed optimism about investment prospects, Mexico’s future economic outlook, and regarding the company's current financial situation. However, there’s some caution amongst economists as Mexico’s financial system stability committee said the economy could slow down due to a complex external scenario, although domestic demand is expected to underpin the economy.
Daily Digest Market Movers: Mexican Peso rally loses steam as the USD/MXN climbs back above 17.50
- The Bank of Mexico (Banxico) held rates at 11.25% and revised its inflation projections from 3.5% to 3.87% for 2024, above the central bank’s 3% target (plus or minus 1%).
- Banxico’s Government Board highlighted Mexico’s economic resilience and the strong labor market as the main drivers to keep inflation at the current interest rate level.
- BBVA updated Mexico’s economic growth forecast, with the Gross Domestic Product rising by 3.2% from 2.4% in 2023 to 2.6% from 1.8% in 2024.
- Mexico posted an August MXN 38,944.3 million deficit.
- Mexico’s Unemployment Rate edged lower from 3.1% in July to 3.0% in August, according to the National Statistics Agency (INEGI).
- September’s first-half inflation in Mexico was 4.44%, down from 4.64% in August, according to INEGI.
- Being an emerging market currency, the Mexican Peso weakens amid risk aversion.
- The drop in Oil prices weighs on the Mexican currency, as its economy relies on crude exports.
- Moody’s rating agency warned the fiscal strategy of the Mexican government in 2024 must be credible after the June elections in defining the country’s stable outlook.
- In July, Moody’s lowered Mexico's rating to “Baa2” with a “stable” outlook but warned of fiscal pressures for the next government due to the 2024 economic budget.
Technical Analysis: Mexican Peso, could extends its losses past the 200-day SMA
The Mexican Peso (MXN) is erasing last Friday’s gains, with the USD/MXN beginning to form a bullish-engulfing candle pattern after the pair bottomed at around 17.41. The emerging market currency could continue its depreciation if the exotic pair manages to break resistance at September’s 27 high at 17.81, immediately followed by the 200-day Simple Moving Average (SMA) at 17.82. Once those two areas are cleared, the USD/MXN next stop could be 18.00.
Mexican Peso FAQs
What key factors drive the Mexican Peso?
The Mexican Peso (MXN) is the most traded currency among its Latin American peers. Its value is broadly determined by the performance of the Mexican economy, the country’s central bank’s policy, the amount of foreign investment in the country and even the levels of remittances sent by Mexicans who live abroad, particularly in the United States. Geopolitical trends can also move MXN: for example, the process of nearshoring – or the decision by some firms to relocate manufacturing capacity and supply chains closer to their home countries – is also seen as a catalyst for the Mexican currency as the country is considered a key manufacturing hub in the American continent. Another catalyst for MXN is Oil prices as Mexico is a key exporter of the commodity.
How do decisions of the Banxico impact the Mexican Peso?
The main objective of Mexico’s central bank, also known as Banxico, is to maintain inflation at low and stable levels (at or close to its target of 3%, the midpoint in a tolerance band of between 2% and 4%). To this end, the bank sets an appropriate level of interest rates. When inflation is too high, Banxico will attempt to tame it by raising interest rates, making it more expensive for households and businesses to borrow money, thus cooling demand and the overall economy. Higher interest rates are generally positive for the Mexican Peso (MXN) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken MXN.
How does economic data influence the value of the Mexican Peso?
Macroeconomic data releases are key to assess the state of the economy and can have an impact on the Mexican Peso (MXN) valuation. A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only does it attract more foreign investment but it may encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this strength comes together with elevated inflation. However, if economic data is weak, MXN is likely to depreciate.
How does broader risk sentiment impact the Mexican Peso?
As an emerging-market currency, the Mexican Peso (MXN) tends to strive during risk-on periods, or when investors perceive that broader market risks are low and thus are eager to engage with investments that carry a higher risk. Conversely, MXN tends to weaken at times of market turbulence or economic uncertainty as investors tend to sell higher-risk assets and flee to the more-stable safe havens.
© 2000-2024. All rights reserved.
This site is managed by Teletrade D.J. LLC 2351 LLC 2022 (Euro House, Richmond Hill Road, Kingstown, VC0100, St. Vincent and the Grenadines).
The information on this website is for informational purposes only and does not constitute any investment advice.
The company does not serve or provide services to customers who are residents of the US, Canada, Iran, The Democratic People's Republic of Korea, Yemen and FATF blacklisted countries.
Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.
Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.
Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.
Bank transfers
