- Mexican peso drops over 2% as oil prices crash 7% amid risk-off.
- Market mood sours after US Pres. Trump impose travel ban on Europe.
- The spot ignores Mexican Finance Minister’s comments on coronavirus.
Global economy, including Mexico, was expected to recover in 2020, coronavirus has changed the whole outlook, Mexican Finance Minister Arturo Herrera told Reuters late Wednesday.
Additional comments
Needs to implement economic measures to combat impact of coronovirus now, before crisis gets worse in Mexico.
Need to speed up government spending, remove obstacles from health budget.
Must purchase all materials, medicine to combat coronavirus on time, in orderly fashion
Need to decide right time to take sanitary measures, such as school, business closures, because they have economic impact.
Clearly government will have to reevaluate our economic growth forecast, the parameters have changed.
USD/MXN revisits three-year top, as oil slides once again
The USD/MXN pair rallies hard in Thursday’s Asian trading, mainly driven by the renewed slump in oil prices that weighed heavily on the Mexican peso.
The peso extended its recent bearish momentum and re-tested the three-year high reached vs. the greenback on Monday at 22.75 after oil prices crashed 7% within an hour, in a quick reaction to the US President Trump’s travel ban announcement on Europe, in light of the fast-spreading coronavirus outbreak.
Trump’s travel restrictions combined with a lack of substantial economic stimulus measures in the US disappointed markets and triggered a risk-aversion wave across the board.
Meanwhile, the recent 8% fall in the peso can be directly associated with the over 30% collapse in oil prices after Saudi Arabia cut its selling price for oil and stood ready to raise outputs following the OPEC+ deal fallout.
Looking ahead, the broader market sentiment and oil price action will continue to lead the way for the spot, as the Mexican economy remains heavily dependent on oil revenues.
USD/MXN technical levels to watch
