Retail Sales Showdown: Impact On USD/MXN Exchange Rate

Tomorrow morning brings the eagerly awaited retail sales data for Mexico, a market that has been on a roller coaster ride throughout the year. Experts predict that the upcoming report will likely show a decrease compared to the previous month’s figures.

In April of 2023, retail sales in Mexico displayed remarkable resilience, advancing by 3.8% from the corresponding period in the previous year. This significant surge surpassed market expectations of 2.5% and marked a notable increase from the previous month’s 2.5% rise. Despite facing higher interest rates imposed by Banxico, the Mexican consumer proved to be robust in driving retail activity. Key sectors that contributed to the growth include textiles, clothing, and accessories (15.9%), healthcare products (10.6%), department stores (12.5%), online retail (10.6%), and groceries, food, drinks, and tobacco (4.5%). However, certain sectors experienced declines, such as hardware and glass goods (-6.7%), household appliances and computers (-4.8%), and auto vehicles and motor trades (-4.3%). On a seasonally adjusted monthly basis, retail sales saw a 1.5% increase.

Taking a technical standpoint, the price action has recently reached the 100% extension on the Weekly chart, bouncing off a 38.2% retracement. While there might still be some downward pressure, it appears that the majority of the downward movement has been made, particularly as it seems to be in the 3rd leg of its down draft. Furthermore, with the FOMC poised to hike rates next week, it is likely that the dollar will experience a spike once again.

As investors eagerly anticipate the retail sales data, market movements are expected to be influenced by these crucial figures, providing valuable insights into the state of the Mexican economy amidst changing interest rates and global economic conditions.