Mexican Peso Snaps Six-Session Losing Streak amid Mixed Economic Data

The Mexican peso is struggling for direction against its US counterpart in the middle of the trading week amid mixed economic data. The peso recently snapped a multi-session losing streak after foreign exchange markets were concerned over slumping factory activity and energy supplies from the US after the blast of wintry weather.

For the tenth consecutive month, retail sales contracted on an annualized basis, sliding 5.9% in December. Despite being largely open throughout the COVID-19 public health crisis, the Mexican economy has seen its retail trade decimated during the coronavirus pandemic. The collapse of the tourism sector mostly contributed to the freefall.
On a monthly basis, retail sales tumbled 2.4%, the largest monthly loss since April.
Mexico’s inflation situation is improving. The mid-month inflation rate rose 0.23% in February, coming in below the 0.27% economists had anticipated. This is down from the 0.51% reading in the previous month. The mid-month inflation rate jumped 3.84% year-over-year, just under the market forecast of 3.88%.
The coronavirus pandemic appears to be getting better in Latin America’s second-largest economy as the seven-day average slipped below 7,000, down from a peak of about 18,000. In total, Mexico has reported 2.05 million cases, with a death toll of 182,000.
The peso had been slumping on fuel supplies coming in from Texas. The Lone Star State was blanketed with freezing temperatures and heavy snowfall last week, resulting in statewide power outages and disruption to production capabilities. This had caused the peso to lose close to 2% against the greenback.
Earlier this month, Mexico’s central bank slashed interest rates by 25 basis points to 4%, meeting the forecast of a Reuters poll of economists. The February rate cut is the first easing in two months.
Aside from cutting rates, the theme was uncertainty, with officials stating that inflation risks and the outlook for economic activity were unknown at this point, citing global risks. For now, it is predicting that headline inflation will edge up in the second quarter.

Global risks prevail, including the rise in virus infections, delays in vaccine production and distribution, the sufficiency of fiscal stimuli, and other tensions.

Headline inflation expectations for the end of 2021 were adjusted slightly upwards, and those for the medium and long term remained stable at levels above the 3% target.

The USD/MXN currency pair shed 0.2% to 20.4692, from an opening of 20.5155, at 15:04 GMT on Wednesday. The EUR/MXN dropped 0.42% to 24.8159, from an opening of 24.9327.
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Original from: www.earnforex.com