The Mexican economy has been remarkably resilient to weakness in the US. Mexico’s exports to the US amounted to $295 Billion in 2015, a staggering 77% of total Mexican exports. Under such circumstances, one would expect the slowdown in US growth in the first quarter to tank the Mexican economy. Instead, robust growth in consumer spending allowed Mexico to grow at a fair pace of 2.6%, year-on-year. But now, as the tide in the US economy turns, the Mexican manufacturing sector, which suffered during the first quarter, could recover. Mexican GDP growth will move higher, and monetary policy will turn tighter. And the main benefiter? It’s the Mexican peso, which has been undervalued for quite a while.
How US Manufacturing Impacts Mexico
Mexico’s exports to the US are varied, ranging from beef to oil, yet the bulk of its US-destined exports are manufactured goods. Vehicles, vehicle parts, tractors, trucks and computer screens are among the manufactured items, and the list goes on. Transports and Machines are the top two categories and amounted to $186 Billion in 2015. Continue reading "Mexican Peso Set To Rally Against EUR And JPY"