The USD/MXN currency pair halted its six-day losing streak, rebounding from its lowest point in seven years at 16.7062. This recovery comes in the midst of a light economic agenda in Mexico and the United States, as well as an overall aversion to risk.
Concerns over a global economic slowdown were sparked by weak data from China, particularly the second-quarter Gross Domestic Product (GDP) and Retail Sales figures. The USD/MXN is currently trading at 16.8247, showing a gain of 0.54%.
Mexican Peso pressured by China’s economic slowdown and upcoming US data
Although Wall Street opened positively, it failed to provide sustained support for the USD/MXN pair.
Asian session data revealed that China’s Q2 GDP growth was 0.8% quarter-on-quarter, lower than the 2.2% growth in the first quarter (Q1). On an annual basis, the economy expanded at a 6.3% rate, falling short of the estimated 7.1%, but surpassing Q1’s 4.5%.
Meanwhile, Industrial Production exceeded expectations, while Retail Sales experienced a significant slowdown, dropping from 12.7% in May to 3.1% in June.
Additionally, the upcoming economic calendar in the US includes the release of Retail Sales data on Tuesday. Analysts anticipate a 0.5% increase, surpassing the previous month’s 0.3%.
Despite disappointing Nonfarm Payrolls figures and indications of disinflation, the recent University of Michigan (UoM) Consumer Sentiment report may foreshadow positive retail sales numbers.
On the same day, the US Federal Reserve (Fed), whose representatives have entered the blackout period before the upcoming monetary policy meeting on July 25-26, will unveil US Industrial Production data, expected to show no month-on-month growth, falling short of May’s 0.2% expansion.
Regarding Mexico, the economic calendar reveals that Retail Sales data will be disclosed on Thursday, projected to have a year-on-year growth rate of 3.5%, below April’s 3.8%.
Weaker-than-expected readings could indicate the need for lower interest rates, considering the Bank of Mexico (Banxico) has increased rates by more than 700 basis points, maintaining the TIIE at approximately 11.25%.
It should be noted that the disinflationary trend is accelerating, prompting speculation about Banxico’s potential rate cut by December 2023.
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