Created
: 2024.10.11
2024.10.11 18:01
The Mexican Peso (MXN) edges higher in its most-traded pairs on Friday, carrying momentum over from its recovery on the previous day, when it found a floor and rose following the release of the Bank of Mexico (Banxico) meeting minutes.
In their discussions, Banxico officials painted an overall benign picture of the Mexican economy, with inflation "improving", a "stable" labor market, and high demand for exports but also a loss of "dynamism" and "productive activity" in the domestic economy.
The Peso may be garnering further support as political risks ease following meetings with the CEOs of US finance giants JP Morgan Chase and Blackrock, and pivot back to the US elections.
The Mexican Peso appreciated following the release of the Banxico September meeting Minutes on Thursday, at which the bank decided by a majority vote to lower the target for the Overnight Interbank Interest Rate by 25 basis points (bps) to 10.50%. There was one dissenter, Jonathan Ernest Heath Constable. Below are ten key takeaways from the Minutes:
Despite investor concerns regarding the political outlook for Mexico after the Morena-led coalition victory in June, there appear to be signs the new Sheinbaum administration is attempting to build bridges with some of the big players in global finance.
On Thursday, the Mexican Secretary of Finance, Rogelio Ramírez de la O, separately met with the CEO of Blackrock, Larry Fink, and JP Morgan Chase's CEO, Jamie Dimon, reports El Financiero. Although no details of the meetings have been made public, the move could be interpreted as part of a charm offensive by the Mexican government to win back the confidence of investors.
"Before the election turmoil, Dimon said last November that he saw a "huge" opportunity in Mexico, amid a boom in factories moving to the country to be closer to the United States, as part of a business trend known as nearshoring," said El Financiero.
Perhaps of greater concern to investors now is the outcome of the US presidential election in November. JP Morgan strategists downgraded their bullish stance on the Mexican Peso on Thursday due to the risks of a "highly unpredictable" US presidential election result.
USD/MXN bottomed out at the base of its long-term rising channel and recovered on October 4. However, its nascent uptrend has reversed after peaking at 19.62 on Thursday. Prices are now pulling back down towards the base of the channel and the 50-day Simple Moving Average (SMA) again.
That said, USD/MXN's new short-term uptrend is still probably intact, and prices could still recover and continue rising within the ascending channel. In addition, the medium and longer-term trends remain bullish, and given the technical analysis principle that "the trend is your friend," this favors an eventual continuation higher when the longer bullish cycles kick in.
A break above the 19.62 high would see USD/MXN resume its uptrend and continue up to the next target at 19.83 (October 1 high).
A break below 19.31 (October 9 low), however, would be a bearish sign indicating the possibility the short-term uptrend had ended and either a sideways or more bearish trend was evolving instead.
The Bank of Mexico announces a key interest rate which affects the whole range of interest rates set by commercial banks, building societies and other institutions for their own savers and borrowers. Generally speaking, if the central bank is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the Mexican Peso.
Read more.Last release: Thu Sep 26, 2024 19:00
Frequency: Irregular
Actual: 10.5%
Consensus: 10.5%
Previous: 10.75%
Source: Banxico
Created
: 2024.10.11
Last updated
: 2024.10.11
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