• Mexican Peso gains although Retail Sales declined for the fourth consecutive month.
• A gloomy economic outlook for Mexico pressures the Bank of Mexico to cut rates at the upcoming meeting.
• IMF revises Mexico’s 2024 growth forecast to 1.5%, widening the divergence with the US, projected to grow at 2.8%.
• Traders eye Mexican mid-month inflation data, Fed speakers later this week to sway the direction of USD/MXN.

The Mexican Peso stages a comeback against the US Dollar on Wednesday, after further data revealed the economy continues to underperform, which could push the Bank of Mexico (Banxico) to lower borrowing costs at the upcoming meeting. At the time of writing, the USD/MXN trades at 19.88. down 0.33%.

Mexico’s National Statistics Agency, known as INEGI, revealed that monthly August Retail Sales were lower than expected, while annual basis figures plunged for the fourth straight month. Wednesday’s data, along with the contraction of the Economic Activity Index, paint a gloomy scenario for the new administration of President Claudia Sheinbaum.

Ahead of the week, October mid-month inflation data is expected on Thursday. Estimates suggest that headline inflation would drop from 4.66% to 4.65%, while the underlying inflation is projected to fall from 3.95% to 3.82%.

Last week, the International Monetary Fund (IMF) projected the Mexican economy will grow 1.5% in 2024, lower than in its previous forecast. In its annual report, the IMF estimates a widening divergence between the economies of Mexico and the US, with the former expected to grow at a 2.8% pace, while the latter deepens its economic slowdown. For 2025, Mexico is projected to grow 1.3%, while the US economy is foreseen growing at a 2.2% pace.