Mexican Peso appreciates, records strongest week since mid-June

• 
  Mexican
  Peso
  extends
  gains
  as
  USD/MXN
  reaches
  17.68
  after
  hitting
  five-week
  low
  of
  17.62.
• 
  Mexico’s
  Industrial
  Production
  rebounds
  in
  May,
  indicating
  resilience
  amid
  economic
  slowdown.
• 
  Banxico
  minutes
  suggest
  potential
  rate
  adjustments,
  while
  US
  producer
  inflation
  rises
  and
  consumer
  sentiment
  deteriorates.

The
Mexican
Peso
extended
its
rally
for
the
ninth
consecutive
trading
day
against
the
Greenback
on
Friday
following
the
release
of
Mexico’s
Industrial
Product
figures
and
June’s
US
inflation
data
on
the
producer
side.
The
USD/MXN
trades
at
17.68,
refreshing
five-week
lows
of
17.62.

Despite
the
annual
weakening,
Mexico’s
Industrial
Production
showed
resilience
by
recovering
in
May,
following
April’s
plunge
in
monthly
figures.
This
recovery
underscores
a
positive

outlook
amidst
the
country’s
ongoing
economic
slowdown.

In
the
meantime,
the
latest
Bank
of
Mexico
(Banxico)
minutes
revealed
that
the
disinflation
process
has
evolved
and
may
spark
discussions
to
adjust
interest
rates
at
upcoming
meetings.
The
board
acknowledged
the
labor
market’s
strength,
yet
stated
that
growth
has
shown
signs
of
weakness.

Meanwhile,
Jose
Luis
Ortega,
CIO
of
Black
Rock
Mexico,
commented
that
inflation
in
Mexico
wouldn’t
return
to
Banxico’s
3%
goal
by
the
end
of
2025.
He
added
that
Banxico’s
easing
cycle
will
be
gradual,
though
adjustments
will
continue.

Across
the
border,
further
inflation
data
revealed
by
the
US
Bureau
of
Labor
Statistics
(BLS)
showed
that
prices
paid
by
producers
picked
up
above
economists’
estimates,
while
US
Consumer
Sentiment
revealed
by
the
University
of
Michigan
(UoM)
deteriorated.

In
the
meantime,

Federal
Reserve
(Fed)
officials
grabbed
the
headlines
and
remained
cautious
in
regard
to
monetary
policy
shifts.
Chicago
Fed
President
Goolsbee
said
that
recent
inflation
data
is
“favorable”
and
might
shorten
the
Fed’s
last
mile
on
inflation.

St.
Louis
Fed
President
Alberto
Musalem
said
that
the
current
interest
rate
level
is
appropriate
for
current
conditions
and
sees
the
economy
growing
between
1.5%
and
2%
this
year.

Daily
digest
market
movers:
Mexican
Peso
prolongs
its
gains,
despite
Banxico’s
dovish
tilt

• Banxico
  board
  members
  project
  growth
  to
  be
  lower
  than
  expected,
  as
  Mexico’s
  economic
  activity
  has
  been
  weak
  since
  the
  end
  of
  2023.
  Most
  policymakers
  mentioned
  that
  inflation
  will
  converge
  toward
  the
  target
  in
  the
  last
  quarter
  2025.
• They
  added
  that
  services
  inflation
  does
  not
  show
  a
  clear
  downward
  trend,
  which
  was
  one
  of
  the
  reasons
  for
  keeping
  rates
  unchanged
  at
  the
  June
  meeting.
• Mexico’s
  Industrial
  Production
  (IP)
  in
  May
  came
  at
  0.7%
  MoM,
  higher
  than
  April’s
  -0.4%
  and
  estimates
  of
  0.4%.
  In
  the
  12
  months
  to
  May,
  IP
  was
  1%,
  which
  fell
  sharply
  from
  5.1%
  in
  April
  and
  missed
  the
  1.2%
  projected.
• Mexico’s
  June
  inflation
  figures
  were
  higher
  than
  expected
  due
  to
  a
  rise
  in
  food
  prices
  when
  most
  economists
  expect
  Banxico
  to
  resume
  lowering
  interest
  rates.
• June
  US
  Producer
  Price
  Index
  (PPI)
  expanded
  by
  0.2%
  MoM,
  higher
  than
  the
  0.1%
  expected
  and
  above
  May’s
  0%.
  Core
  PPI
  was
  hotter
  than
  the
  0.2%
  foreseen,
  at
  0.4%
  MoM.
• Annually
  based,
  PPI
  ticked
  up
  from
  2.4%
  to
  2.6%,
  above
  forecasts
  of
  2.3%.
  Underlying
  inflation
  was
  3%,
  up
  from
  2.6%.
• UoM
  Consumer
  Sentiment
  declined
  from
  68.2
  in
  June
  to
  66.0
  in
  July.
  Inflation
  expectations
  for
  one
  year
  came
  as
  expected
  at
  2.9%,
  down
  from
  3%.
• US
  Dollar
  Index
  (DXY),
  which
  tracks
  the
  value
  of
  a
  basket
  of
  six
  currencies
  against
  the
  US
  Dollar,
  tumbled
  more
  than
  0.30%
  and
  is
  down
  at
  104.12.
• According
  to
  the
  CME
  FedWatch
  Tool
  data,
  the
  odds
  for
  a
  September
  cut
  are
  88%,
  up
  from
  85%
  on
  Thursday.

Technical
analysis:
Mexican
Peso
capitalizes
USD
weakness
as
USD/MXN
drops
below
17.70

The
USD/MXN
continues
to
slip
further,
with
traders
eyeing
a
test
of
the
17.50
psychological
level.
Momentum
remains
on
the
seller’s
side,
as
depicted
by
the
Relative
Strength
Index
(RSI),
though
key
support
levels
in
the
exotic
pair
will
be
tested
soon.

If
USD/MXN
drops
below
17.60,
the
next
support
would
be
the
confluence
of
the
December
5
high
and
the
50-day
Simple
Moving
Average
(SMA)
near
17.56/60,
followed
by
the
200-day
SMA
at
17.28.
Further
losses
would
test
the
100-day
SMA
at
17.20.

Conversely,
USD/MXN
buyers
need
to
clear
the
June
24
cycle
low
of
17.87,
which
has
turned
into
resistance,
before
challenging
the
18.00
figure.
Further
upside
potential
is
seen
above
the
July
5
high
at
18.19,
followed
by
the
June
28
high
of
18.59,
allowing
buyers
to
aim
for
the
YTD
high
of
18.99.