As risk-averse sentiment prompts outflows from the emerging market Peso, USD/MXN anticipates its first weekly gain since April 28 at 17.7767.
A shift toward safe-haven assets like the US Dollar was sparked by comments made about inflation by US Treasury Secretary Janet Yellen and Fed Chair Jerome Powell.
The Mexican peso is weakening as a result of Banxico’s halt to its rate hike cycle and weaker-than-expected retail sales data in Mexico.
The USD/MXN pair is aiming for its first weekly gain since April 28—up more than 1%—going into the weekend as it rises above the 20-day Exponential Moving Average (EMA). The Mexican Peso (MXN) debilitated after Banxico’s stopped its fixing cycle, while strong US information legitimizes another loan fee increment by the Fed in June. The USD/MXN is currently up 0.30 percent at 17.7767, as of this writing.
USD/MXN central scenery: The US dollar appreciates while the Mexican peso suffers from safe-haven flows.
Since the middle of the North American session, when Wall Street closed with modest losses, sentiment has turned negative. Following a string of bank failures, investors were alarmed by comments made by US Treasury Secretary Janet Yellen to bank CEOs on Thursday suggesting that additional mergers may be required. As a result, outflows from the emerging market peso to the safety of the US dollar were triggered by flows toward safe-haven assets.
Aside from this, there was a mix of dovish and hawkish commentary from the Federal Reserve throughout the week. However, Jerome Powell, Chair of the Federal Reserve, stated on Friday that inflation is significantly above the goal and that the Fed is strongly committed to returning inflation to the 2% target, adding that “failure would cause greater harm.” According to Powell, the banking system is robust, and tightening banking credit conditions may prevent rate increases.
Bloomberg claims that US House Speaker Kevin McCarthy halted debt ceiling negotiations on the grounds that the White House was “resisting spending cuts, casting doubt on efforts in Washington to avert a catastrophic default.”
Banxico made the decision to halt its 725 bps rate hikes for the Mexican Peso, citing the economy’s disinflationary process as many pressures have eased. Nonetheless, Mexico’s central bank stated that the main reference rate would remain at its current level for some time.
a must-read: Mexico: After 15 back to back climbs, national bank keeps key rate unaltered at 11.25%
The Mexican economic docket reported that year-over-year retail sales rose by 2.5 percent in March, below estimates of 2.9% and below the 3.4% increase in February. Sales were 0% monthly, which was lower than the 1% expected.