- The Mexican weight slides in the midst of growing bets due to a cutting rate of Banxico and global uncertainty.
- The economic data of Mexico disappoint with a private expense in fall and estimates of activity that point to a contraction in February.
- Banxico cuts rates at 50 basic points (PB) on March 27, since inflation remains above the objective and GDP is checked down.
- Commercial tensions between the US and Mexico and the caution of the Fed keep USD/MXN at high levels, with operators attentive to inflation data and rates decisions next week.
The Mexican peso remained defensive against the US dollar on Friday, fed by fears of commercial policies that the United States (USA) implemented in the middle of a week occupied in the space of the Central Bank. Weaker data in Mexico suggest that the economy is slowing down more than expected, hence the depreciation of the weight. The USD/MXN is quoted at 20.23, with an increase of 0.45%.
During the week, Mexico’s economic data were mixed after the publication of aggregate demand figures and private spending. The first expanded, but the expense collapsed in the fourth quarter of last year. A preliminary reading of economic activity estimates that the economy contracted in February, increasing the chances of the Bank of Mexico (Banxico) continuing to relax politics, although inflation has not reached the goal of 3%.
The latest Survey of Citi Mexico expectations revealed a unanimous consensus that Banxico would cut interest rates at 50 basic points (PB) at the March 27 meeting. The majority of the analysts reviewed the primary reference rate of Mexico by 2025 and review the general and underlying inflation figures.
It is noteworthy that the Gross Domestic Product (GDP) was reviewed down, while the USD/MXN exchange rate settled slightly down.
On the other side of the border, the US economic agenda remained empty on Friday, but the operators continued to tell the monetary policy decision of the Federal Reserve (Fed) on Wednesday.
The statement revealed that those responsible for politics see politics as appropriate and suggested that they will cool the balance reduction rate. The president of the Fed, Powell, said they are not in a hurry to cut rates and recognized some uncertainty about the future of the economy due to US tariffs.
Other officials crossed the news on Friday, but failed to cause a reaction in the USD/MXN exchange rate. The president of the Fed in New York, John Williams, said that the current moderately restrictive monetary policy is “totally appropriate”, adding that uncertainty makes it difficult to know how the economy will behave.
Chicago’s president, Austen Goolsbee, said that when there is a lot of uncertainty, you have to wait for things to clarify.
Next week, Mexico’s economic agenda will include inflation figures from mid -March, retail sales, commercial balance numbers and the decision on interest rates of Banxico. In the US, the operators will be attentive to the preferred inflation indicator of the Fed, the Personal Consumer Price (PCE) index.
Daily summary of market movements: Mexican weight falls while economists observe a moderate banxic
- The CITI Mexico expectations survey showed that most analysts expect interest rates to end 8% in 2025, below 8.25% in the previous publication. The USD/MXN is expected to end at 20.98, below 21.00 in the last survey.
- Inflation of mid -March is expected to increase 3.77% in February to 3.80% year -on -year, as indicated in the survey, and that underlying prices rise from 3.61% to 3.65% year -on -year.
- Inflation expectations were maintained anchored in the high range of 3%, while GDP is expected to expand 0.6%, below 0.8%in the last survey.
- The global indicator of economic activity of Mexico fell 0.7% year -on -year in February. In comparison with January, the economy probably grew an intermensual 0.2%.
- The Economic Cooperation and Development Organization revealed earlier this week that US tariffs on Mexican products could cause a recession in Mexico.
- The operators had valued that the Fed would relax politics in 71 basic points (PB) throughout the year, according to the data of the Chicago Board of Commerce.
Technical perspective of the USD/MXN: The Mexican weight goes back while the USD/MXN rises above 20.20
The USD/MXN is consolidated after bouncing from the annual minimums reached on March 14 in 19.84, but remains limited by the figure of 20.30, defended by the vendors, which are also pressing the simple mobile average (SMA) of 100 days in 20.35 and the 50 -day SMA in 20.40.
The relative force index (RSI) is bassist. However, in the short term, it favors buyers. The index is about to cross above its neutral line, which would pave the way for a greater increase.
In that scenario, the USD/MXN needs to overcome the 100 and 50 days smokes. Once exceeded, the next level of resistance would be the peak of March 4 in 20.99. On the contrary, the first key support is 20.00, followed by the minimum of the year of 19.84, before the 200 -day SMA in 19.68.
Mexican weight FAQS
The Mexican weight (MXN) is the most commercialized currency among its Latin American peers. Its value is widely determined by the performance of the Mexican economy, the country’s central bank policy, the amount of foreign investment in the country and even remittance levels sent by Mexicans living abroad, particularly in the United States. Geopolitical trends can also affect MXN: for example, the Nearshoring process (or the decision of some companies to relocate the manufacturing capacity and supply chains closer to their countries of origin) is also considered a catalyst for the Mexican currency, since the country is considered a key manufacturing center in the American continent. Another catalyst for MXN is oil prices, since Mexico is a key exporter of the raw material.
The main objective of the Central Bank of Mexico, also known as Banxico, is to maintain inflation at low and stable levels (in or close to its 3%target, the midpoint of a tolerance band between 2%and 4%). To do this, the bank establishes an adequate level of interest rates. When inflation is too high, Banxico will try to control it by raising interest rates, which makes the indebtedness of homes and companies more cooling, thus cooling the demand and the economy in general. The highest interest rates are generally positive for Mexican weight (MXN), since they lead to higher yields, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the MXN.
The publication of macroeconomic data is key to evaluating the state of the economy and can have an impact on the valuation of the Mexican weight (MXN). A strong Mexican economy, based on high economic growth, low unemployment and high confidence is good for MXN. Not only attracts more foreign investment, but it can encourage the Bank of Mexico (Banxico) to increase interest rates, particularly if this fortress is accompanied by high inflation. However, if the economic data is weak, the MXN is likely to depreciate.
As an emerging market currency, the Mexican weight (MXN) tends to rise for periods of risk, or when investors perceive that the general market risks are low and, therefore, are eager to participate in investments that carry a higher risk. On the contrary, the MXN tends to weaken at times of market turbulence or economic uncertainty, since investors tend to sell higher risk assets and flee to the most stable safe shelters.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
