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The Mexican Peso (MXN) saw a modest uptick on Monday, buoyed by a surge in risk appetite following softer-than-expected US jobs data that has raised expectations of potential interest rate cuts by the Federal Reserve (Fed), thereby reducing borrowing costs for businesses and consumers.
Asian markets also contributed to the positive market sentiment, with the Chinese data showing continued expansion, providing further support for the Peso which typically appreciates in risk-on environments.
At the time of publication, key exchange rates include USD/MXN at 16.95, EUR/MXN at 18.24, and GBP/MXN at 21.29.
Asian Market Rally Boosts Mexican Peso
The Mexican Peso experienced gains on Monday amid a rally in Asian stock markets fueled by China’s Caixin Services PMI data indicating ongoing expansion. Moreover, the weaker US jobs data from Friday has increased hopes for potential interest rate cuts, spurring market optimism.
Asian indices reflected this sentiment, with the Nikkei closing 0.93% higher in Japan, China’s Shanghai Composite trading 1.16% higher, and the Hang Seng index up by 0.53%.
Resilient Mexican Economy Surprises Amidst High Interest Rates
Mexico’s economic indicators continue to defy expectations despite the Bank of Mexico (Banxico) maintaining historically high interest rates to combat inflation pressures.
Although Mexico’s GDP growth rate for Q1 was lower year-on-year, there was a 0.2% quarterly increase. Other positive indicators include the Manufacturing PMI remaining in expansive territory for April, stable Business Confidence, and February’s Gross Fixed Investment exceeding expectations.
Inflation expectations for 2024 have risen according to a recent Banxico poll, with analysts forecasting an increase to 4.20%, up from the previous estimate of 4.10% in March.
Given this economic resilience, Banxico is likely to retain its elevated interest rates at 11.0% for now, which in turn supports the Mexican Peso by attracting foreign capital inflows into the country.
