Mexican Peso appreciates more than 0.15%, overcoming weak Retail Sales data and sluggish economic growth projections.

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• Mexican Peso appreciates more than 0.15%, overcoming weak Retail Sales data and sluggish economic growth projections.
• Former Banxico Deputy Governor Elizondo suggests a continued tight monetary policy stance in Mexico.
• Improved US Consumer Sentiment and revised inflation expectations likely capped the Peso’s advance.

The Mexican Peso (MXN) registered solid gains against the US Dollar (USD), but it remains set to register losses of more than 1.45% in the week after Retail Sales in the country missed estimates, growing less than expected. In addition, the National Statistics Agency (INEGI) revealed that Mexico’s economy would likely grow below the 3% expected by analysts in December in a preliminary reading by the Timely Indicator of Economic Activity (IOAE). Nevertheless, the USD/MXN exchanges hands at 17.11, down by 0.29%, favoring the emerging market currency.

In the meantime, former Bank of Mexico (Banxico) Deputy Governor Everardo Elizondo commented that it’s too soon to relax monetary policy in Mexico, adding, “There are enough reasons to remain worried.” Elizondo added, “if [policy] is loosened, inflationary expectations will deteriorate.”

Across the border, Consumer Sentiment improved, according to a University of Michigan poll, and households downwardly revised inflation expectations for one and five-year periods.

The USD/MXN remained trading sideways on Friday, though with a tilt to the upside as buyers reclaimed the 17.00 psychological barrier. If they push the exchange rate toward the 200-day Simple Moving Average (SMA) at 17.36, that could pave the way to test the 100-day SMA at 17.42. That level comes ahead of the December 5 high at 17.56 and the May 23 high of 17.99.

On the other hand, the ongoing pullback below 17.20 could pave the way for a drop toward the 17.00 figure. Once cleared, further downside is expected at the January 8 low of 16.78. Once surpassed, the next support would be the August 28 cycle low of 16.69, ahead of last year’s low of 16.62.

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