He Mexican peso (MXN) depreciates faster than US Dollar (USD) On Monday, markets in Mexico were closed to commemorate the birth of former Mexican President Benito Juarez. A week of robust economic activity, with monetary policy decisions from the US Federal Reserve (Fed) and the Bank of Mexico (Banxico) will be the main driver of price action. USD/MXN is trading up 0.88% at 16.85, close to a new five-day high.
Mexico’s economic agenda will be empty on the first day of the week, but will make headlines on Tuesday. The total demand and private expenditure will be published in the agenda. January retail sales data, which is expected to recover, will be released on Thursday, followed by Bancsico’s decision. Most investors expect the Mexican central bank to cut funding costs from 11.25% to 11% on March 21.
Across the border, US housing data could weigh on the dollar ahead of the Federal Open Market Committee (FOMC) decision. Market participants will keep an eye on any adjustments in the statement, the Summary of Economic Estimates (SEP) and Fed Chairman Jerome Powell’s press conference.
USD/MXN is about to change to a neutral bias, as buyers have intervened around the yearly lows and lifted the exchange rate closer to the 16.80 point area. A break of the latter could push the pair towards the 17.00 figure. Once crossed, the next stop will be the 50-day SMA at 17.02, followed by the 100-day SMA at 17.16 and the 200-day SMA at 17.21.
On the other hand, if the pair stays below 16.80, it could pave the way for a test of last year’s low of 16.62, followed by October 2015 low of 16.32 and the psychological level of 16.00.
The Mexican peso is the legal tender of Mexico. MXN is the most traded currency in Latin America and the third most traded currency on the American continent. The Mexican peso is the first currency in the world to use the $ sign, before the later use of the dollar. The Mexican peso or MXN is divided into 100 cents.
Banxico is the country’s central bank, the Bank of Mexico. Created in 1925, it offers the national currency, the MXN, and its priority objective is to preserve its value over time. In addition, the Bank of Mexico manages the country’s international reserves, acts as the lender of last resort to banks and advises the government economically and financially. Banxico uses monetary policy tools and techniques to accomplish its objective.
When inflation is high, the value of the Mexican peso (MXN) decreases. This implies an increase in the cost of living for Mexicans which impacts their ability to invest and save. At a general level, inflation affects the Mexican economy because Mexico imports large quantities of final consumption products, such as gas, fuel, food, clothing, etc., and large quantities of production inputs. On the other hand, the higher the inflation and debt, the less attractive the country is to investors.
The exchange rate between the USD and MXN affects imports and exports between the United States and Mexico, and can affect demand and trade flows. The value of the dollar against the Mexican peso is influenced by factors such as monetary policy, interest rates, consumer price index, economic growth, and certain geopolitical decisions.
The exchange rate between the USD and MXN affects imports and exports between the United States and Mexico, and can affect demand and trade flows. The value of the dollar against the Mexican peso is influenced by factors such as monetary policy, interest rates, consumer price index, economic growth, and certain geopolitical decisions.
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