Background on the Mexican Peso and its Recent Performance
The Mexican peso has been gaining strength against the US dollar, reaching levels not seen in 17 months. The local currency advanced to below 18 units, taking advantage of the US dollar’s weakness and anticipation of crucial data from the United States.
Market Performance on Monday
On Monday’s trading session, the exchange rate closed at 17.9812 units, according to the official data from Banco de México (Banxico). Compared to Friday’s reference price of 18.0050 units from LSEG (no official data due to the holiday), it showed an increase of 2.38 centavos or 0.13 percent.
The dollar price fluctuated between a high of 18.0378 units and a low of 17.9696 units. The Dollar Index (DXY) from the Intercontinental Exchange, which compares the US dollar to six reference currencies, decreased by 0.09% to 98.31 points.
Expert Analysis and Future Outlook
According to analysts from Monex Grupo Financiero, the Mexican peso benefited from the US dollar’s retreat and the resolution of tensions between Mexico and the United States, thanks to a recent agreement resolving a water dispute.
Kapital Grupo Financiero analysts note that the currency is currently in oversold territory but still has room to deepen to a target of 17.85 pesos. They also see potential for technical retracements with targets at 18.05 and 18.15 pesos per dollar.
Upcoming Economic Indicators
This week, the market awaits key reports on US labor market and inflation data. These reports will help predict interest rate trajectories in the first quarter following the Reserve Federal’s recent cut on Wednesday.
On the local front, significant economic data will be released throughout the week, with particular attention on Banco de México’s latest decision of the year. A widespread expectation is for another 12th rate cut amidst signals of economic growth weakness.
Banco de México has already published the results of their survey among private sector experts, who slightly lowered Mexico’s economic growth expectation for the year to 0.39% from 0.40%. They also adjusted inflation expectations to 3.75% from 3.74 percent.
Moreover, the experts consulted by the central bank maintained their expectation that the interbank lending rate would end the year at 7%, according to the median of projections from 41 local and foreign analysis groups received between December 3 and 8.
Key Questions and Answers
- Q: Why is the Mexican peso gaining strength against the US dollar? A: The Mexican peso has been strengthening due to the US dollar’s weakness and recent resolutions of tensions between Mexico and the United States.
- Q: What economic indicators are crucial this week? A: Key reports on the US labor market and inflation data will be released, along with significant economic data from Mexico, including Banco de México’s latest interest rate decision.
- Q: What are the expectations for Banco de México’s interest rate decision? A: There is a widespread expectation of another 12th rate cut due to signals of economic growth weakness.
- Q: How have private sector experts adjusted their economic forecasts for Mexico? A: Private sector experts have slightly lowered Mexico’s economic growth expectation for the year to 0.39% and adjusted inflation expectations to 3.75%.
