Title: Mexican Peso Plummets to 7-Week Low of 18.81 Amid Disappointing GDP Data; USD Buying Spikes
As the Mexican Peso faces a weekly low of 18.81, driven by lackluster Q2 GDP growth and USD buying, investors brace for potential Bank of Mexico rate cuts on August 8.
The Mexican Peso suffered a more than 0.50% decline against the US Dollar after the release of Q2 2024 GDP data fell slightly below expectations, signaling a slowdown in economic growth. With the USD/MXN pair reaching 18.73, investors are flocking to the Greenback, pushing it to seven-week highs from daily lows of 18.41.
Mexico’s INEGI reported a 0.2% QoQ GDP growth for Q2, missing estimates of 0.4% and lagging behind Q1’s 0.3% expansion. This deceleration in growth has raised the likelihood of a rate cut by the Bank of Mexico, which had previously raised rates to 11.25% before cutting them to 11.00% in March.
With the next Banxico meeting scheduled for August 8, economists predict that the GDP data could influence policymakers to lower interest rates gradually in the coming months. Andres Abadia of Pantheon Macroeconomics highlighted the need for rate cuts as real GDP growth continues to slow.
Meanwhile, in the US, a solid JOLTS report showing a drop in job openings but still exceeding estimates, coupled with an upward revision in May figures, has also impacted the USD/MXN pair.
Key Market Highlights:
- Mexico’s Q2 2024 GDP grew 2.2% YoY, surpassing estimates and the previous quarter’s expansion.
- June Balance of Trade in Mexico was below consensus at $-1.073 billion.
- US JOLTS data revealed 8.184 million job openings, higher than estimates but lower than May’s revision.
- Consumer Confidence in the US rose to 100.3 in July, exceeding expectations.
- Traders are pricing in a 54 bps easing by the end of the year, according to CBOT data.
Technical Analysis:
The USD/MXN pair is poised to test the YTD high of 18.99 after hitting multi-week highs of 18.81. RSI momentum favors buyers, with potential resistance levels at 19.00, 19.23, and 19.50 if breached. Conversely, support levels lie at 17.93, 17.58, and 17.38 if USD/MXN retreats.
In conclusion, the Mexican Peso’s recent slump, driven by disappointing GDP data and USD buying, highlights the challenges faced by the economy. Investors should monitor the upcoming Banxico meeting on August 8 for potential rate cut decisions, which could impact the currency markets and investment strategies.