The Mexican peso has seen big movements in this third week of January 2024. From the opening of the week until Wednesday, the currency depreciated -0.55%, but today and Thursday, it regained gains and added a positive movement of 0.23%, taking the price to17.15 pesos per dollar.
This depreciation of the Mexican currency may have been due to different causes that have affected the price.
To begin with, traders are awaiting the possible movements that the Federal Reserve (FED) and the Bank of Mexico (Banxico) could have, regarding a decrease in interest rates in both countries, in the first quarter of 2024.
Before being able to pronounce on this issue, the two countries will have to review their macroeconomic data in detail and based on their analysis, we will see possible movements or not, in their reference rates.
However, several macroeconomic data published in the last few days in the United States have shown the strength of its economy, and due to this, a decrease in rates is not visible at first sight.
Another cause that could be affecting the Latin American currency is the upcoming elections in the United States. Analysts identify that there is a possibility of a re-election of former President Donald Trump as president. The latter has just won the state of Iowa, with 51% of the votes, in the first with the Republican Party.
It should be noted that former President Trump has commented on several occasions that if he wins the presidential election he will impose tariffs on imports to several countries, including the countries that make up the free trade agreement (USMCA).
If we look a bit into the past, when Mr. Trump became president in 2017, the peso depreciated sharply, taking the currency down to the zone 21.20 per dollar. At that time, there was talk about the impact that auto companies installed in Mexico could have, what was going to happen with trade relations between The United States and Mexico and as well
as, the border wall between the two countries.
Likewise, traders are closely watching the macroeconomic data to be announced on Friday, January 19, 2024, regarding Retail Sales (Monthly) November 2023, with a forecast of 0.5% and Retail Sales (Annual) November 2023, with a forecast of 3.2%, with respect to Mexico and for the United States, Existing Home Sales, for the month of December 2023, with a
forecast of 3.82M.
In conclusion, all these factors may have affected the depreciation movements of the Mexican currency in the last four days.