Mexican Peso holds steady amid mixed US Retail Sales, jobs data

• Mexican Peso stable despite US Retail Sales affected by high interest rates.
• Bank of Mexico reports a modest 2.2% growth in Foreign Direct Investment for the year.
• US economic outlook positive, says White House Adviser, ahead of Fed Governor Waller's speech.

Mexican Peso is virtually unchanged against the US Dollar on Thursday following a softer retail sales report from the United States (US), an indication that higher interest rates impact consumer spending. Regarding the labor market, it remains solid after the US Bureau of Labor Statistics (BLS) announced that unemployment claims were below estimates. The USD/MXN trades at 17.07, almost flat.

Mexico’s economic docket remains scarce, though the Bank of Mexico revealed that Foreign Direct Investment (FDI) registered an expansion of 2.2% by the end of last year.  Nevertheless, the data suggests the growth rate slowed, failing to reach the expectations of international organizations and economists.

Across the border, White House Economic Adviser Lael Brainard said the fundamentals of the US economy seem “quite good,” and consumer purchasing power remains strong. Later, her former colleague, Fed Governor Christopher Waller, will cross the wires.

Daily digest market movers: Mexican Peso stays firm as Foreign Direct Investment grows

• Mexico’s Foreign Direct Investment came at $36 billion dollars, according to the Ministry of Economy. Although last year’s data marked a historical level, it missed estimates of $43.9 billion by the United Nations Conference on Trade and Development.
• A survey of the Bank of Mexico (Banxico) announced that 25 polled economists expected a higher figure of $38 billion.
• The US Commerce Department announced that Retail Sales experienced a greater decline than the anticipated -0.1% contraction, recording a -0.8% MoM drop attributed to winter storms. Additionally, the sales data for December was revised downward from an initial estimate of 0.6% to 0.4% MoM.
• The US Bureau of Labor Statistics (BLS) reported that for the week ending February 10, unemployment claims fell to 212K, coming in below both the prior figure and the expected 220K.
• Market players are expecting the first rate cut by the Federal Reserve at the June monetary policy meeting as they trimmed odds for March and May.
• US 10-year Treasury note yield is almost flat at 4.253%, while the US Dollar Index (DXY) dropped toward 104.41, down -0.28%.
• At its latest monetary policy decision, Banxico revised its inflation expectations to the upside for the period from Q1 to Q3 of 2024, expecting inflation to converge toward 3.5% in Q4, based on the latest monetary policy statement.

Technical analysis: Mexican Peso tests key level as USD/MXN hovers around 17.10

The USD/MXN consolidated in the 17.05-17.10 area during the last couple of days, holding near the 50-day Simple Moving Average (SMA) at 17.10. If buyers decisively break that level, the first resistance would be the psychological 17.20 area. A breach of the latter and the exotic pair could threaten the 200-day SMA at 17.29, before aiming toward the 100-day SMA at 17.39.

Conversely, if sellers step in and push prices below the 17.05 area, that would pave the way to test the 17.00 figure. Further downside is seen at last year’s low of 16.62.

USD/MXN Price Action – Daily Chart