Mexican Peso reaches two-year high despite weaker Retail Sales
The Mexican currency appreciates to levels last seen in May 2024 as the USD/MXN falls to a two-year low as the US Dollar tumbles even though business activity in the services sector improved. The exotic pair trades at 16.92, down 0.22% for the week and 0.50% for the week.
The Mexican Peso has reached a two-year high, trading at 16.92 after the US Dollar fell to a two-year low. Despite a weaker retail sales report, the peso appreciated to levels last seen in May 2024. Mexican retail sales fell short of estimates for a 0.1% expansion in June, shrinking -0.2% month-over-month. However, this was an improvement compared to May's -0.6% contraction.
The Bank of Mexico (Banxico) remains cautious about rates, recognizing inflation risks while maintaining the current policy stance. Banxico highlighted that geopolitical tensions, such as the Middle East conflict, could negatively impact global economic activity. Meanwhile, the US services sector showed improved business activity, while manufacturing activity expanded moderately.
The Mexican Peso is influenced by factors like the Mexican economy's performance, Banxico's policy, foreign investment, and remittances from Mexicans living abroad. Geopolitical events, like nearshoring and oil prices, also play a role. Banxico aims to keep inflation at low and stable levels, adjusting interest rates accordingly.
Strong economic data can attract foreign investment and lead to higher interest rates and a stronger peso, while weak data can cause depreciation. In the short term, USD/MXN is trading below recent support levels, with the RSI slipping into oversold territory but not signaling a clear recovery.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
