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The Mexican Peso (MXN) has stalled after rallying against most counterparts over recent sessions. The Peso had been supported by a rise in risk appetite from easing geopolitical tensions and strong US tech company earnings.\u00a0<\/p>\n
On Tuesday the general market mood remains positive, helped by the Caixin Chinese Manufacturing PMI<\/a> \u2013 which hit a 14-month high \u2013 as well as French and Spanish GDP growth beating estimates in Q1.\u00a0<\/p>\n USD\/MXN is trading at 17.03, EUR\/MXN at 18.22 and GBP\/MXN at 21.34, at the time of publication during the European session.\u00a0<\/p>\n The Mexican Peso could be subject to volatility<\/a> after the release of the preliminary reading for Q1 Mexican GDP growth data at 12:00 GMT.<\/p>\n In the previous quarter, the GDP growth rate was recorded as 2.5% YoY and 0.1% QoQ. If the data beats the previous results it could lead to an appreciation in the Mexican Peso.\u00a0\u00a0<\/p>\n The Mexican Peso will continue to strengthen as long as market volatility remains low, according to analysts at Rabobank.\u00a0<\/p>\n \u201c..as long as volatility is declining, MXN will rally. While suppression of volatility is a tenuous assumption, it is our base case for the next couple of weeks,\u201d says Rabobank.\u00a0<\/p>\n Relatively high interest rates in Mexico \u2013 the Banxico overnight interest rate is 11.00% \u2013 support inflows from the carry trade in which traders borrow in a currency with low interest rates and use the loan to buy a currency with higher interest rates like the Mexican Peso.\u00a0<\/p>\n \u201cWe expect interest rate differentials to remain favorable,\u201d says Rabobank.\u00a0<\/p>\n In the case of Mexican Peso\u2019s most highly traded pair USD\/MXN, the rate differential remains Peso-favorable.\u00a0<\/p>\n \u201cUS-MX 2yr rate differentials have widened 33bp in April and will continue to act supportive for MXN over the course of May.\u201d<\/p>\n The Banxico is likely to keep interest rates unchanged at its May meeting based on recent Banxico commentary.\u00a0<\/p>\n \u201cWe have changed our Banxico forecast<\/a> to reflect a pause at the May 9 meeting. This follows Deputy Governor Jonathan Heath\u2019s interview on April 20, when he noted that he is \u2018leaning towards a pause in May, and we can see how data evolves by June,\u2019 which he highlighted is \u2018likely\u2019 to be a unanimous decision,\u201d says Rabobank.\u00a0<\/p>\n The high number of long positions amongst non-commercial speculators in the MXN futures market as well as a seasonal effect, which suggests May is a favorable month for\u00a0 MXN, are further drivers of upside, according to the bank.\u00a0<\/p>\n Rabobank forecasts USD\/MXN to fall below 17.00, eventually reaching a target of 16.80.\u00a0<\/p>\n USD\/MXN further extends its sideways trend over the short-term, oscillating within a range that has a floor at 16.86 and a ceiling at 17.40.\u00a0<\/p>\nMexican Peso traders await GDP data\u00a0<\/h2>\n
Mexican Peso to continue strengthening \u2013 Rabobank<\/h2>\n
Technical Analysis: USD\/MXN sideways trend continues<\/h2>\n
USD\/MXN 4-hour Chart\u00a0<\/h3>\n