- The Mexican peso prepares for a weekly gain of 0.89% as economic resilience surprises markets.
- Trump’s mixed comments about tariffs agitate volatility, but appetite for risk raises the currencies of emerging markets.
- Traders prepare for the publication of the GDP of Mexico Q1 next week to evaluate the recession risks.
The Mexican peso extended its profits against the US dollar for the second consecutive day, ready to finish the week with 0.89%profits, driven by an improvement in appetite for the risk and better economic data of Mexico than expected. At the time of writing, the USD/MXN is traded at 19.52, with a 0.32%drop.
Wall Street closed with profits in Friday’s session, despite the fact that US President Donald Trump made contradictory comments about China. Night news for American traders revealed Beijing’s disposition to reduce tariffs on US products. Despite this, Trump said he will not reduce tariffs unless they “give us something substantial.”
The National Institute of Statistics and Geography (INEGI) revealed that the Mexican economy grew in February, against forecasts, which expected a moderate expansion.
Meanwhile, in the US, the April consumer’s feeling index of the University of Michigan (UOM) deteriorated drastically, registering its fourth lower reading since the late 1970s, indicating that Americans became skeptical about economic perspectives.
Therefore, the USD/MXN slipped down, driven by the good data of Mexico. However, next week, INEGI will publish the growth rate of the Gross Domestic Product (GDP) for the first quarter of 2025. A negative reading would confirm that the economy is in a technical recession.
What moves the market today: the Mexican peso was appreciated during the week despite the Dovish posture of Banxico
- The divergence between Banxico and the Fed favors a greater increase in the USD/MXN. The Banxico Governing Council expressed its decision to continue flexible politics. On the contrary, Fed is considered cautious, since some officials have shown concerns about a reactivation of inflation driven by tariffs.
- The economic activity of Mexico in February expanded an intermensual 1%, above the forecasts of a growth of 0.6%. In annual terms, the activity fell from 0% to -0.7%, better than expected.
- The economic data revealed during the week showed an inflation reactivation in the first half of April, according to INEGI. Retail sales in February were lower than expected, showing the ongoing economic slowdown.
- The subgovernor of Banxico, Omar Mejía Castelazo, revealed that the economy has been experiencing a slowdown since 2023, he said in Washington.
- The CITI Mexico expectations survey shows that economists expect Banxico to cut their rate at 50 basic points at the May meeting. For the whole year, they project that the main reference rate ends about 7.75%.
- As for the USD/MXN exchange rate, private analysts see the exotic pair ending at 20.93, above 20.90. It is projected that inflation in 2025 ends at 3.78% with underlying figures at 3.80%, mostly aligned with the previous survey.
- Mexico’s economy is expected to grow 0.2% in 2025, below 0.3% projected in the previous survey.
Technical Perspective of the USD/MXN: The Mexican weight remains bullish while the USD/MXN remains below the key technical level
The price action suggests that the USD/MXN has a bearish trend and could continue its downward trend, once it records a daily closure below 19.50. In that case, the following support would be the minimum of 23 in 19.46, the minimum of the year to date (YTD), followed by the psychological figure of 19.00.
If buyers want to push up prices, they must recover the 200 -day SMA in 19.93, followed by the figure of 20.00. A rupture of this last will expose the confluence of the maximum of April 14 and the 50-day SMA about 20.25-20.29 before trying the 100-day SMA in 20.33.
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.
