• USD/MXN ends a six-day losing streak, jumps 0.54%, driven by a risk-off market amid weak Chinese GDP and Retail Sales data.
• Despite Wall Street’s positive opening, concerns over China’s economic slowdown overshadow optimism; awaits key US and Mexico retail sales data.
• Potential rate cut by the Bank of Mexico in December 2023, coupled with the US Federal Reserve’s upcoming policy meeting, adds uncertainty to the USD/MXN.

USD/MXN snaps six days of losses and climbs from around 7-year lows reached at 16.7062, amid a light economic calendar in Mexico and the United States (US) and a risk-off environment. Weak data from China, namely Gross Domestic Product (GDP) for Q2 and Retail Sales, spurred fears for a global economic slowdown. The USD/MXN is trading at 16.8247, up 0.54%.

China’s economic deceleration and upcoming US data weighed on the Mexican Peso

Wall Street opened in the green, though it failed to underpin the USD/MXN pair. Data during the Asian session showed that China’s GDP grew 0.8% QoQ, beneath the first quarter (Q1) 2.2%, while on an annual basis, the economy expanded at a 6.3% pace, below 7.1% estimates, but exceeded Q1’s 4.5%. In the meantime, Industrial Production exceeded forecasts, while Retail Sales decelerated sharply from 12.7% in May to 3.1% in June.

Aside from this, the upcoming economic docket in the US will witness the release of Retail Sales on Tuesday, which are expected to rise by 0.5%, above the prior month’s 0.3%. Although the latest Nonfarm Payrolls report disappointed the markets and inflation numbers flash a disinflation process, the latest University of Michigan (UoM) Consumer Sentiment report could be a prelude to a positive retail sales report.

The same day, the US Federal Reserve (Fed), whose speakers entered the blackout period ahead of the upcoming monetary policy meeting on July 25-26, will unveil US Industrial production, estimated at 0% MoM, below May 0.2% expansion.

On the Mexican front, the calendar will reveal Retail Sales until Thursday, estimated at 3.5% YoY, below April’s 3.8%. Softer-than-expected readings could show that the economy would need lower interest rates, as the Bank of Mexico (Banxico) raised more than 700 basis points, keeping the TIIE at around 11.25%. It should be said; the disinflationary process is gathering pace, putting on the table, Banxico’s first rate cut by December 2023