Mexican Peso to Euro (MXN/EUR) Weakening as September’s Mexican Factory Exports Slump
The Mexican Peso to Euro (MXN/EUR) exchange rate has been softening in response to data showing that Mexico’s trade surplus slipped in September. August’s figure was recorded at $0.590 billion but Mexican factory exports declined in September and the trade balance became a deficit of $-1.123 billion.
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Mexican Economic Recovery Slows as Exports Tumble
Monday’s figures show Latin America’s second largest economy could be losing momentum in its recovery—a factor that’s caused investor demand for the Mexican Peso to wane. The fall in seasonally adjusted factory exports totalled 0.63% which was pressured lower by a 5.97% fall (the most significant since August 2012) in automobile exports.
Mexico’s economic recovery gained momentum in the second quarter after suffering from lethargy in the first part of the year. Economists are now forecasting a 2.5% growth by the close of 2014, despite shrinkage in the economy in August due to service sector sluggishness. This year’s growth could be significant considering 2013 saw expansion of just 1.4%.
European Central Bank Stress Test Weighs on Eurozone Sentiment
However, it isn’t just Mexican figures that have proved to be less than favourable in recent days. Sunday saw the European Central Bank (ECB) announce that its recent stress test, which came to a head last week, showed 25 of the 150 banks surveyed weren’t stable enough to pass.
However, since the initial result the ECB stated that the majority of banks could in fact survive another financial crisis. That being said, further concern was roused when ECB official Vitor Constancio stated that the tests hadn’t taken into account the possibility of deflation—a topic that has been the centre of many economists’ debates regarding the Eurozone. Constancio asserted that it hadn’t been included as a factor ‘because we [the ECB] don’t consider that deflation is going to happen.’
Strategist Neil Mellor commented: ‘There are some positives from the stress tests and it could have been a whole lot worse. But to have not fully taken deflation into account in the tests, if Constancio’s accusations are correct, makes the tests a little incomplete, which possibly explains why the Euro isn’t vaulting higher.’
The ECB is scheduled to become the financial supervisor of the Euro area soon—a role which the central bank is utilising to attempt to regain control of the 18-nation area following ten years of financial chaos. The central bank hoped that the exercise would encourage investor sentiment in the Single Currency.
Industry expert Eli Haroush suggested: ‘Some people may wish to conclude that because there is no “blood on the street,” the exercise is not credible. I think it is credible. It was a very serious effort and significant amount of capital has been raised during 2014.’
Mexican Peso to Euro (MXN/EUR) Exchange Rate Forecast
Mexican data is thin on the ground this week with only the Banco de México’s interest rate decision on Friday. The 3.0% benchmark rate is expected to remain in place. Meanwhile, the Euro could experience significant movement on the release of German Unemployment Change, Unemployment Rate and Consumer Price Index figures on Thursday.
As Germany is the Eurozone’s largest economy, any figures for the nation are used as an indication for the rest of the currency bloc. However, they will only be an indication for a short time as Eurozone Unemployment Rate and Consumer Price Indexes will follow on Friday.
The Mexican Peso to Euro (MXN/EUR) Exchange Rate is currently trending in the region of 0.0579.