Key points:
- The Mexican peso weakens to 18.4 per USD, nearing 15-month low of 18.75.
- Banxico maintains interest rates at 11% with rising inflation.
- Unemployment drops to 2.6%, trade surplus at $1.99 billion.
The Mexican peso weakened to 18.4 per USD, approaching its fifteen-month low of 18.75. Markets are reacting to the latest rate decision by Banxico and recent economic data.
The central bank, Banxico, maintained its interest rate at 11% during its June meeting, aligning with market expectations and underscoring its commitment to controlling inflation, which surged to 4.78% by mid-June, surpassing expectations.
Picture: The Mexican peso losing strength against the US dollar, as observed on the VT Markets app.
Robust economic data, but political instability problematic
In May, the unemployment rate of Mexico dropped to 2.6%, beating the forecasted 2.7%. Additionally, the trade balance showed a surprising surplus of $1.99 billion, exceeding the anticipated deficit of $2.04 billion.
Despite this robust economic data, concerns over policy reforms by the Morena party in June have continued to pressure the Mexican peso, causing market volatility and testing the efficacy of the inflation management efforts of Banxico.
Market outlook and opportunities
While the strong economic indicators of Mexico provide a positive backdrop, the uncertainties surrounding policy reforms and inflationary pressures necessitate a cautious approach for traders. Monitoring the evolving political landscape and policy actions from Banxico will be crucial in navigating the fluctuations.
Such an environment can lead to heightened volatility in the USDMXN currency pair can offer lucrative entry and exit points for day trading. In doing so, traders should be wary of the potential for sudden market shifts due to ongoing political and economic developments, while managing proper risk management along the way.
