The Mexican Peso (MXN) is experiencing a decline in value against the US Dollar (USD) due to below-expectations growth and activity in Mexico. This has led to speculation that the Bank of Mexico (Banxico) will cut interest rates in August, further weakening the Peso. As a result, the USD/MXN pair is on a short-term uptrend, with a target set on the June 28 high.
Recent macroeconomic data releases, including disappointing retail sales figures, have contributed to the negative outlook for Mexico’s economy. This, coupled with expectations of an interest rate cut by Banxico, has led to a downward revision in the Peso’s year-end forecasts. The USD/MXN pair is expected to rise from 18.70 to 18.80, according to the Citi Research Expectations survey.
Despite a slowdown in economic growth, Mexico’s economy expanded by 1.6% year-over-year in May, exceeding market expectations. However, retail sales growth has slowed, indicating challenges in the economic landscape. Fitch Ratings reaffirmed Mexico’s BBB- rating but warned of potential impacts from proposed judicial reforms. The International Monetary Fund (IMF) also revised Mexico’s 2024 GDP growth forecast down to 2.2%.
Market participants are now awaiting the release of Mexico’s mid-month inflation figures, which could further impact monetary policy decisions. Additionally, the Mexican Congress is set to discuss President Lopez Obrador’s judicial reform, adding another layer of complexity to the economic situation.
Technical Analysis: USD/MXN Targets June 28 High at 18.60
USD/MXN has found support at the 50-day Simple Moving Average (SMA) and is now in a bullish trend. The next target for the pair is the key June 28 swing high at 18.60. However, the medium and long-term trends remain uncertain.
Analysis Breakdown
The decline of the Mexican Peso against the US Dollar is driven by weak GDP and retail sales data, leading to expectations of an interest rate cut by Banxico. This could further weaken the Peso and impact the USD/MXN pair. The economic challenges in Mexico, coupled with potential judicial reforms and inflation concerns, create a complex situation for investors. Technical analysis shows a bullish trend for USD/MXN, with a target set at 18.60. Overall, the economic landscape in Mexico is uncertain, requiring a cautious approach to investment decisions.