Mexican Peso: Support from real rates and US talks – Commerzbank
Michael Pfister at Commerzbank highlights that the Mexican Peso has strengthened, with USD/MXN back below 17, helped by a weaker Dollar and Mexico’s strong performance among major currencies.
Commerzbank analyst Michael Pfister notes that the Mexican Peso has strengthened, trading below 17 USD/MXN due to factors such as a weaker dollar, strong performance by Mexico among major currencies, better-than-expected growth, smoother USMCA negotiations, easing core inflation, and Banxico's decision to pause rate cuts. This has left real interest rates supportive for the Peso.
The Mexican economy seems to be performing better despite the Iran conflict, while USMCA negotiations are progressing smoothly without major issues, unlike US negotiations with Canada. Additionally, month-on-month core inflation has been moving closer to the target band. Banxico's halt in rate cuts has positively impacted the peso.
Meanwhile, the US Dollar is facing pressure due to a rallying Japanese Yen, firming expectations for another RBA rate hike, and mixed China trade balance data. USD/JPY is recovering and has retested 154.00, while US Dollar selling continues despite hawkish Fed expectations and rising geopolitical tensions, supporting the pair. Gold declines to the lower end of its daily range but remains above $4,400 amid a softer US Dollar.
However, hawkish US Federal Reserve expectations and geopolitical uncertainties provide some support to the safe-haven dollar, keeping a lid on the non-yielding bullion. The oil market may appear calmer than in recent months, but diesel is sending a different message, with the US diesel crack spread surging above $100 per barrel for the first time.
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