Mexican Peso Gains Against US Dollar as Retail Sales Surge
The Mexican Peso (MXN) strengthened against the US Dollar (USD) on Thursday following a decline in the Greenback. US Retail Sales exceeded expectations, easing concerns about economic slowdown. This led to a shift in investor sentiment, with rate markets pulling back on bets of a double rate cut from the Federal Reserve (Fed) in September.
Mexico’s central bank, Banxico, maintained its decision to cut interest rates to 10.75% despite a rise in headline inflation to 5.57% in July. Deputy Governor Omar Mejia emphasized the importance of considering multiple data points in making monetary policy decisions.
Core inflation in Mexico slowed to 4.05% in July, with Banxico expecting it to reach the 3% target by Q4 2025.
Key Market Insights: Peso Strengthens on Improved Sentiment
- US Retail Sales surged to 1.0% in July, boosting risk appetite and weakening the Greenback.
- Despite a contraction in US Industrial Production, markets remain optimistic about a Fed rate cut in September.
- Investors are awaiting the University of Michigan Consumer Sentiment Index for further insights into rate cut expectations.
Peso Forecast: MXN Gains Momentum Against USD
The Mexican Peso continued its upward trend against the US Dollar, with USD/MXN easing below 18.80. The pair is approaching the 50-day Exponential Moving Average (EMA) near 18.33.
Although USD/MXN has retraced from recent highs, it remains on a positive trajectory, with the MXN outperforming the Greenback in recent trading sessions.
Analysis and Conclusion
The Mexican Peso’s strength against the US Dollar is driven by positive economic indicators and a shift in investor sentiment. Despite concerns about inflation and economic slowdown, Banxico’s decision to cut interest rates has supported the MXN’s performance.
Investors should monitor key economic data releases and market sentiment to assess the MXN’s future movements. Understanding the factors influencing the currency’s value, such as interest rates, inflation, and market risk, can help individuals make informed decisions about their finances and investments.