Mexican Peso Reverses Early Gains

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Mexican Peso Reverses Early Gains

Mexican Peso (Mxn) Reverses Early Gains Against Us Dollar

The release of the Mexican Retail Sales initially provided a boost to the Mexican Peso (MXN), but that was quickly reversed.

The retail sales showed that consumer spending contracted in Mexico during March. In simple words, the economy is cooling down as consumers are spending less.

Mexican Retail Sales Down In March

The recent Mexican Retail Sales mean the Bank of Mexico (Banxico) now has more reason to cut interest rates from their all-time high of 11%. Once the Banxico starts with the rate cuts, a resurgence in consumer spending and retail sales will follow.

At the start of Monday, Peso started on a positive note as the Deputy Governor of Banxico commented on how they have to raise the policy rate in order to control inflation. She also added that Mexico is still trying to fight rising inflation.

The USD/MXN is currently exchanging hands near 16.60 while the GBP/MXN is trading near 21.07. Similarly, the EUR/MXN is also seen trading at 18.05.

closer look at the Mexico Retail sales data for March showed a decline, which led to weakness in the MXN. On a monthly basis, the retail sales in Mexico have gone down by 0.2%. As for the y/y basis, the decline is around -1.7%, while February showed a 3% rise.

Last Friday, the comments from Irene Espinosa regarding the lack of urgency to cut the rates were received well by the markets. However, the release of retail sales has once again brought the topic of rate cuts under the spotlight.

The technical analysis of the USD/MXN shows that the trend remains in favor of the MXN. As a result, the USD/MXN turned lower during Monday's session as the traders were trying to favor the MXN against the USD.

For now, there's no clarity on the path of rate cuts in Mexico and even in the USA. So, the first central bank to go with rate cuts will be the one who loses this FX battle.

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