The Mexican Peso (MXN) has declined against major currencies on Wednesday due to a series of underwhelming macroeconomic data releases, indicating a slowdown in the Mexican economy. This has fueled expectations of a potential interest rate cut by the Bank of Mexico (Banxico) in August, further weighing on the Peso.
Key Economic Indicators:
- Economic Activity: Mexico’s Economic Activity Indicator for May revealed a significant deceleration compared to the previous month, highlighting the economic slowdown.
- Retail Sales: May retail sales figures were also disappointing, indicating weaker consumer spending.
- GDP Forecast: The International Monetary Fund (IMF) has downgraded Mexico’s 2024 GDP growth forecast, citing a slowdown in manufacturing linked to reduced US economic activity.
These economic concerns, coupled with the prospect of a rate cut, have led to a downward revision of the Peso’s year-end forecasts. Additionally, Fitch Ratings reaffirmed Mexico’s BBB- rating but cautioned about potential negative impacts from proposed judicial reforms.
Market Focus:
Traders are now keenly focused on the release of Mexico’s mid-month inflation figures, expected on Wednesday, for further insights into the monetary policy outlook. The upcoming discussion of President Lopez Obrador’s judicial reform in the Mexican Congress adds another layer of uncertainty to the economic landscape.
Technical Analysis:
USD/MXN has rebounded from the 50-day Simple Moving Average and breached the 18.00 level, signaling a bullish short-term trend. The next target for the pair is the June 28 swing high at 18.60. However, the medium and long-term trends remain unclear.