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EUR/USD holds steady below 1.0750 ahead of key US data
EUR/USD continues to trade in a relatively tight channel below 1.0750 on Friday as investors refrain from committing to large positions. The US Dollar struggles to find demand ahead of April PCE inflation data, which could influence the market pricing of the next Fed decision.
GBP/USD clings to daily recovery gains near 1.2350
GBP/USD is holding its recovery gains toward 1.2350 after the UK Retail Sales data came in mixed for April. Cable is advancing as the US Dollar is losing ground amid a correction alongside the US Treasury yields. Focus now shifts toward the US PCE inflation data.
Mexico’s Gross Domestic Product (YoY) registered at 3.7% in the first quarter of 2019, below expectations of 3.9%.
The economic growth rate is Mexico’s lowest in four years, and its slowest rate since a contraction in the fourth quarter of 2015. This is a major disappointment for the Mexican economy, in a time when they are expected to be achieving higher growth rates.
Mexico’s economic growth has been hindered by lagging investment, weak domestic consumption and a deteriorating trade balance. Investment has remained weak due to uncertainty over fiscal and monetary policies. The Trump administration’s announcement of a tariff on steel and aluminum exports from Mexico has also adversely affected the economy.
Domestic consumption has also been weak due to higher inflation and weak wage growth, while the government’s public spending program has yet to have a significant impact. Furthermore, falling oil prices have affected Mexico’s trade balance, as the country is a major exporter of oil.
The government has responded to the weak economic growth by introducing a series of economic reforms, such as loosening labor regulations and raising the minimum wage. The Bank of Mexico has also reduced interest rates to stimulae lending and promote economic activity.
Despite these measures, it appears that the Mexican economy will remain weak in the near-term. The government will need to implement further fiscal and monetary stimulus if they are to achieve the desired growth rate of between 2-3% for 2019.