Returning then to early 2013, the picture was mixed, on the
one hand there was much promise from the growth forecasts and the new
administration’s plans for regulatory change.
The situation was so good that the country cuts rates in mid
March.
However the latter part of the first quarter was more
challenging as not all the stats were positive and of course not everyone was
embracing the proposed reforms.
The weaker stats were more noticeable in April and were
accompanied by teacher protests against education reforms as well as objections
to banking reform.
In May following Obama’s visit the country strengthened its
economic ties with the US. And it received some good news in the form of a
credit rating rise. But not all the stats were good and the Peso fell in May
due to the concerns about the GDP and wider global worries.
May growth announced in July was better than expected nut
doubts remained and the Peso fell in August as GDP fell for the first time in
four years and forecasts were cut. Energy and other reforms continued however
and Mexico continued to be popular with private equity and other investors.
September started with more protests by teachers, which were
broken up later in the month. On the other hand an interest rate cut led to a
rally in the peso and stock market ( a contrast with other EM nations)
2 weeks of floods in later September caused problems and added costs.
The next two months
were mixed, energy reforms continued and the stats were slightly better though
the impact on debt of the lower CGP
caused concerns.
By December the mood was one of, hope that the new reforms
would be a success but concern that the consumer may not be able to give the
economy the ongoing boost needed.
The first quarter of 2013 continued the trend of 2012 for
the peso as it rose against the dollar and many other currencies ( although
without reaching its peak of July 2011)
It was not even particularly bothered by the early March
interest rate cut. It was, however, approaching a key turning point.
April was thus a little more mixed, yet the positive overall
trend continued into early May.
Despite the better credit rating for the country in May, the
mix of poorer stats and global influences meant that the Peso began to rapidly
reverse its direction and by the end of June it had lost all its 2013 gains
With the background showing problems for many EM currencies,
better stats in July saw some recovery but this was soon reversed in August as
growth forecasts were cut.
However September’s interest rate cut and more positive
sentiment saw another turnaround, although difficult conditions in the latter
hald of the month reversed some of this.
Although fluctuations continued in October and November they
were within a smaller range as there was less certainty about the future. These
movements against the dollar probably had as much to do with the US shutdown’s
effect on the US$ as to the Peso itself
December’s wait and see attitude has at least removed some
of the negative sentiment that dominated the middle of the year and as a result
the Peso has shown some gains.
There are likely to be more protests in the first couple of
months of 2014 as the government attempt to push through more reforms. However
these are likely to be the last such significant challenges for a while. There are still some difficulties for the
leadership which has to make some compromises in order to progress but overall
the first quarter is characterised by tolerance of the changes and possibly
even some improvement in the economic stats.
April is likely to be an uneventful month, with perhaps
again some uptick in the positive news. June is more mixed, with the leadership
perhaps trying to take too big a step but on balance it will be ok.
June and July have a positive flavour too. Although there
could be some shock information or disruption to communications. However there
is an opportunity to press forward with plans.
August might see a continuation of the sudden events of July
but although the government is being held back a little by the issues of recent
years and their impact on the population it still finds that it has support.
There is less such support in September and October though
although it seems that the economic stats will be more positive.
November sees more of the same, but a chance to push through
reforms even if they have to be adapted slightly.
December is much more interesting with the people opening up
more to the benefits of change and providing more support for the government.
As such it will be a favourable time for the president who will be able to
harness the support to improve conditions more easily at this time.
2014 Peso
As 2014 starts we can expect more activity in the currency.
The initial position looks mixed for up to April. There is more liquidity in
the currency but there remain some concerns over borrowings which offset the
positive feel. As a result there is likely to be no dramatic trend for this
period just minor volatility. In the latter
part of the period though the activity picks up and swings are likely to
be greater. On balance any trend is likely to be an increase in value but not
too big.
May is more clear cut. Although there are some negative
issues the overall picture is very positive and the Peso is likely to rise
notably.
In June to July the picture is more mixed but still mildly
positive. In August there may be some bigger movements as a result of global
rebalancing but the direction of these is less clear.
September sees a highly positive environment for the
peso with very little downside so we can
expect increased trade in the currency and increased volumes this month.
October and November are a little more mixed. However there
is the potential for some big positive movements in value during the period, as
well as the start of a new environment which will become more important in the
coming two years. The likelihood is that
by the end of November a key peak will be touched.
In December there are more restrictions and some pull back
in values
2015
2015 is in fact likely to be characterised by the strength
of purpose of the leadership.
Certainly the first 3 months of 2015 see a continuation of
the mood established in December 2014.
April and May might be more mixed with a return to some
sudden unexpected announcements or events similar to the previous summer, but they are unlikely to have long lasting
impact. Indeed it is possible that they are externally generated events to which
Mexico must respond but without being directly damaged.
And June through to August look like being extraordinarily
good months for the country. However
there is a risk of a sudden unexpected event affecting the leadership which
would usually be worrying. However, as the conditions are so positive in this
case, it is much more likely that he is instigating the changes.
September and October see more progress, although it is more
slow and steady than the leaps forward that occurred in the previous months.
The last 2 months of 2015 see more surprise announcements or
communication disruptions and a slightly less ideal situation for the
government, but this is relative, overall it looks like the steady progress continues.
2015 Peso
2015 starts with a very interesting picture- there are
significant events in other key currencies which affect the trade of the Peso .
As a result the period through April is unstable although April itself sees
more clear positive interest in the currency.
May and June are much more tricky with the culmination of
the global events of the last 6 months. The resultant volatility is likely to
suppress the Peso value for these few months although there are still some
positive sentiments. There may be interest rate changes
The confusion and uncertainty
continues to reign in July and August probably with more changes in rates. August in particular is challenging and the
currency is likely to fall. However don’t get the impression that the problem
is the Peso itself, it is more likely to be a knock-on effect.
September is an even more difficult month with volatility
and further attempts to manage the currency through rate changes etc. Indeed
the overall impression is that the Peso fundamentals are actually sound and
once the international situation is more settled its value will reflect
this.
October sees more challenges and probably restriction on
trade of the currency or at least some fall in value.
November is better, there is consolidation and a gradual
return to some semblance of normality.
But December does see some residual challenges and once more
the need to adjust rates to stabilise the situation.
2016
2016, however, does not start quite so well.
The sudden events/disruptions of November and December, now take on a more
long term impact, with implications for the overall economic health of the
country. However the situation is not too serious, but it does mean that the
leadership must work harder to keep its support.
March is a month of wait and see.
April and May are months of drama though. There may be
challenges to the leadership and there is also a challenge to the economic
position with difficulty balancing priorities.
In June through to August the situation becomes even more
interesting as the impact of the longer term economic questions that have
arisen ( possibly due to external influences)
initiate a long term shake up in the country’s fundamental
structures. The government continues to
have to pedal fast to keep up with the consequences of events and the need to
possibly restructure the country’s financial position.
Everything is changing and the position of the country in
the global order is no exception. However September sees a positive mood with
the people and leadership co-operating
for common goals.
October and November see a return to the disruptive
conditions of April and May. Once again
the leadership is challenged. But it is all part of a bigger shift in the
country. Expect this to be a time of dramatic changes both internally but also
in Mexico’s relations with its partner countries.
December is a much quieter month as the country absorbs the
impact of the previous two months. There are still ongoing long term economic
shifts in play but these are
overshadowed by the harnessing of all forces to achieve resolution of more
immediate issues. There may even be military involvement, although there is no
suggestion of any clampdown or dispute with the majority of the people.
2016 Peso
The Peso trend for 2016 looks positive but there is likely
to be a great deal of volatility around that trend. And this volatility can be
seen as early as January. There are likely to be more rate adjustments in order
to manage the overall financial position that underpins the currency. At first
these may have a negative impact but in February the picture looks better.
March is relatively mixed, with little sense of direction.
Volatility and uncertainty reign again in early April, and
as a result there is suppression of value again.
May and June see the uncertainty increase and lead to
inertia and certainly no rise in value – in fact there may be some falls in the
middle of the period. The latter part of June though sees more positive
sentiment again.
August is mixed, with some rate announcements – a distinct
trend is unlikely now but at least the volatility is less.
September sees more of the themes from May and June, and
this time they are likely to end in an inflationary picture .
October is a mixed month, there are still some difficulties to contend with but less
uncertainty.
November and December continue this mixed theme. November at
first should be relatively calm for the
currency but there is a return to volatility in December and less of a positive
outlook, albeit temporarily, by the end
of the year.
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