The EUR to MXN exchange rate recently hit 21.53, close to its three-month average of 21.65, reflecting a stable trading range of 3.2% from 21.27 to 21.95. Analysts attribute the current level of the euro mainly to the European Central Bank's (ECB) steady interest rate policy and mixed economic indicators from the Eurozone. While the latest GDP figures showed growth surpassing expectations, concerns linger over inflation and a slight contraction in business activity indicated by a PMI drop to 49.7 in October 2024. A moderation in inflation could prompt the market to speculate on potential rate cuts from the ECB next year, and this may exert downward pressure on the euro.
The geopolitical landscape, particularly the ongoing conflict in Ukraine, has also played a significant role in shaping the euro's trajectory. Experts note that continued EU support for Ukraine and the consequences of sanctions on Russia contribute to currency fluctuations and economic uncertainty in the Eurozone, impacting the euro's strength against currencies like the Mexican peso.
In contrast, the Mexican peso is currently navigating a challenging environment overshadowed by U.S. trade policy uncertainties, particularly regarding tariffs on Mexican imports, which introduced volatility following their imposition. The Bank of Mexico's decision to hold interest rates steady at 11.00% signals a dovish stance that may further pressure the peso against the euro. Furthermore, impending reviews of the USMCA add to the uncertainty surrounding Mexico's economic outlook.
Marketers are also keeping an eye on global sentiments, which have shown some improvement as U.S.-China trade talks gain traction, supporting the peso at times. In terms of oil prices, a vital aspect for both currencies, the recent average price of OIL to USD is 65.07, slightly below its three-month average. Given oil's significance to both economies, fluctuations in oil prices could still influence the EUR/MXN exchange rate.
Overall, as EUR and MXN navigate through these multifaceted challenges, the future movements of both currencies will largely depend on ongoing economic data releases, central bank policies, and geopolitical developments. Investors and businesses engaged in international transactions should remain vigilant and consider these factors to optimize their currency exchange strategies.
