August 5, 2019 - Written by John Cameron
STORY LINK Pound Mexican Peso (GBP/MXN) Exchange Rate Soars as MXN Struggles on Heightened Risk Aversion
GBP/MXN Exchange Rate Rises as Global Trade Tensions Reignite
The Pound Mexican Peso (GBP/MXN) exchange rate soared by 1.44% today, leaving the pairing fluctuating around Mex$23.836.
The Mexican Peso (MXN) plummeted against the Pound (GBP) following today’s publication of the Mexican consumer confidence figures for July, which fell below forecast from 106.1 to 105.1.
The risk-correlated Mexican Peso plummeted as US-China trade tensions were exacerbated last week following fresh tariffs on Chinese imports from US Donald Trump.
As the Mexican Peso is sensitive to global political and economic developments, it has suffered from traders fleeing for safe-haven assets like the Euro.
Today also saw China retaliate against the US, lowering the Chinese Yuan to an 11-year low against the US Dollar.
Julian Evans-Pritchard, an Economist at Capital Economics, said:
‘The fact that they have now stopped defending 7.00 against the dollar suggests that they have all but abandoned hopes for a trade deal with the US. [T]he [People’s Bank of China] has effectively weaponised the exchange rate.’
GBP/MXN Exchange Rate Edges Highers as UK Services PMI Improves amid Brexit Uncertainty
The Pound rose against the Mexican Peso following today’s release of the UK Markit Services PMI for July, which rose above forecast from 50.2 to 51.4.
Duncan Brock, a Group Director at the Chartered Institute of Procurement and Supply, commented:
‘While services activity grew in July, this marginal improvement on last month is a smokescreen. Fundamental weaknesses remain in a sector pinned down by Brexit uncertainty and increasingly stagnant global economic growth.’
Sterling has remained subdued against many of its other competitors, however, as Downing Street announced today that the UK would leave the EU on October 31 ‘whatever the circumstances’.
A spokesperson for Prime Minister Boris Johnson said in their statement:
‘We must restore trust in our democracy and fulfil the repeated promises of parliament to the people by coming out of the EU on 31 October. Politicians cannot choose which votes to respect. They promised to respect the referendum result. We must do so.’
As a result, Pound traders have become increasingly jittery on fears of a no-deal Brexit in October, with no signs of relations improving between the UK and the EU over the controversial Irish backstop.
GBP/MXN Forecast: Sterling Could Likely Begin to Ease as Brexit Fears Increase
Meanwhile, Sterling traders will be looking ahead to tomorrow’s publication of the BRC Like-for-Like Retail Sales figures for July, which are expected to improve from -1.6% to 0.1%.
Mexican Peso traders will be looking ahead to Thursday’s Mexican Core Inflation figures for July, which are expected to rise from 0.30% to 0.31%.
Global economic and political developments will also remain in focus, and with any signs of easing, this could boost the Mexican Peso as risk-appetite returns.
The GBP/MXN exchange rate will likely remain volatile this week with both global economic developments remaining in focus, while no-deal Brexit fears will likely continue to weigh on the Pound.
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TAGS: Pound Sterling Forecasts