After the long flat trend in September, the rates have moved up sharply in favor of the USD. The reason for this sudden change was mainly due to the earthquake in Mexico that occurred on September 19 and claimed the lives of over 300 people. This tragic event also reflected on the country's economy. The GDP fell in the 3rd quarter of 2017 by 0.2%. This GDP decline was the first since 2013, when two devastating earthquakes happened and the country was also damaged by several hurricanes. The manufacturing PMI index fell in October to 49.2, which indicates a serious downturn in the economy. It is also the lowest level since July 2013.
However, it is not only natural disasters that affected the value of the MXN, but also the doubtful perspectives for the North American Free Trade Agreement (NAFTA), which puts pressure on the MXN in the long term. The US President does not hide his negative attitude towards NAFTA and wants to review the key points of the agreement, being a supporter of protectionist policy for the United States. Analysts do not rule out a complete breakup of NAFTA. There is also an assumption that the United States and Canada have already started a discussion about a new agreement instead of NAFTA.
This week, the rates continue in favor of the USD. Despite the fact that the Federal Reserve left interest rates unchanged, and despite the fact that new FED Chairman will be Jerome Powell who is a supporter of softer monetary policy, the value of the USD hasn't changed significantly. Investors retain confidence in a rate hike in December amid strong economic statistics and a good situation on the labour market. Economic growth has been mentioned also by the Federal Reserve. The most impressive data was about the consumer confidence index, which in October amounted to 125.9, reaching the highest level for the last 17 years. The reports about employment from the ADP and an increase in employment by 235,000 people has also impressed investors, exceeding all forecasts. Today's expected reports about the labor market are likely to be in line with ADP statistics and confirm the growth in the economy of the United States.
At the moment the rates are in the frames of the uptrend, although it seems like the trend is losing its intensity. Mexico's economy will be gradually recovering after the natural disasters and may show relative growth that will support the MXN, together with rising oil prices. However, the US dollar may continue to strengthen based on a possible rate hike in December. The Stochastics and MACD oscillators indicate the efficiency of the deals to BUY in the frames of the current trend. Such deals may be effective in the short and medium term.
