Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
January 27, 2025 –
“The peso weakened against the US dollar, hovering near multi-year lows as market participants reacted to US political developments and disappointing economic data. Donald Trump mentioned that he is considering imposing a 25% tariff on Canada and Mexico as early as February 1st. His comments increased market volatility, favouring safe-haven assets such as the Dollar, and weighed on the Peso as Mexico’s economic stability could be threatened.
Domestically, monthly retail sales were below expectations and contracted by 0.1%, marking the second consecutive month of decline. This decline is further exacerbated by a decrease in annual sales, suggesting that consumption could be facing long-term structural challenges.
Adding to the peso’s bearish outlook, slowing inflation could increase the likelihood of a rate cut by Mexico’s central bank (Banxico) at its February meeting, a dovish move that contrasts with expectations of tighter monetary policy by the US Federal Reserve.
Looking forward, Mexico’s heavy reliance on US trade and remittances renders its economy vulnerable to external shocks. The implementation of tariffs or the tightening of US immigration policies could potentially strain public finances and weaken domestic consumption.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone