Dollar Rises to 18.68608 Pesos as Mexico Returns to Trade Deficit

Key Facts

The dollar rose to 18.68608 pesos at the close on October 27, compared with 18.5683 pesos the previous day, according to EL7 data. The move between the two closes means the peso ended the session weaker against the U.S. currency. Reuters linked the peso’s move to investors adjusting positions ahead of major central bank meetings. It pointed to investors’ concerns about the declining appeal of carry trades, which benefit from interest-rate differentials between currencies. That puts position adjustments and monetary policy expectations at the center of the market’s focus on the currency.

On trade, Mexico posted a $606 million deficit in September, after a $605 million surplus in August, according to Trading Economics data. The result was below the market consensus, which had forecast a $400 million deficit. Exports rose 37.9% year over year to $77.80 billion, while imports increased 33.1% to $78.40 billion. Imports exceeded exports during the month, returning the balance to deficit despite strong annual export growth. Shipments of electrical and electronic equipment were among the biggest moves, rising 94.7% year over year.

The components of non-oil trade presented a different picture from the overall balance, with a $2.75 billion surplus in September, down from $4.05 billion in August, according to Trading Economics. The narrowing of this surplus means non-oil trade’s contribution to the external balance declined from the previous month. This came alongside September imports rising to $78.40 billion, exceeding exports of $77.80 billion. In August, the trade balance had recorded a $605 million surplus. In September, the balance shifted to a $606 million deficit.

The next focus is Mexico’s preliminary third-quarter gross domestic product estimate, scheduled for release on October 30, according to the calendar of the National Institute of Statistics and Geography. The market consensus for GDP growth is 0.5% quarter over quarter and 2.4% year over year. Trading Economics’ own estimate is 0.2% quarter over quarter and 1.7% year over year. Published estimates differ, making the preliminary reading another point at which to assess economic performance after the trade data. The reported figures will provide a basis for comparing quarterly activity with available forecasts.