Mexican Peso Retreats Amid Bets on Fewer Rate Cuts

Posted on January 13, 2025 by Ignacio Teson

The Mexican peso depreciated on Monday, pressured by the global strengthening of the U.S. dollar as markets prepared for the release of key U.S. inflation figures.

The exchange rate closed the session at 20.7235 pesos per dollar, compared to Friday’s official close of 20.7052, according to data from the Bank of Mexico (Banxico). This represents a loss of 1.83 cents, or 0.09%.

[[USD/MXN-graph]]

During the session, the [[USD/MXN]] traded within a range, peaking at 20.8682 pesos and hitting a low of 20.6797. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.18% to 109.85.

Relevant Data and Fewer Fed Cuts

Investors are closely watching Tuesday’s U.S. Producer Price Index (PPI) release, followed by the critical Consumer Price Index (CPI) on Wednesday. Ahead of these reports, the yield on 10-year U.S. Treasury bonds climbed.

Recent data from the U.S. service sector and labor market have bolstered expectations that the Federal Reserve (Fed) may face greater challenges in cutting interest rates this year. Higher-than-expected inflation figures could further dampen hopes for rate reductions, with markets currently pricing in only one Fed rate cut for 2025.

Mexican Peso Outlook

Additionally, investors are monitoring statements from U.S. President-elect Donald Trump, whose policy plans, including the implementation of broad tariffs, have fueled inflation concerns.

The exchange rate remains under pressure within a range of 20.70 to 20.87 pesos per dollar. A breach of the 21.00 threshold appears increasingly likely, particularly with Trump’s impending return to the presidency on January 20.

10-Year Yields Approaching 5%: What Are the Implications?

Posted on January 13, 2025 by Ignacio Teson

The U.S. 10-year Treasury yield remains on the rise at 4.77%, potentially reaching a key 5% level due to the strength shown by the country’s economy. This has dampened expectations for further interest rate cuts by the Federal Reserve (Fed).

The retreat in bond yields continues today — The surge in yields continues today

It is possible that U.S. 10-year Treasury bonds could hit 5%, but from a medium-term perspective, these yield levels may soon appear attractive.

Although the movement in rates is significant, it is largely justified by the current economic context. For example, the official employment report for December, released last Friday, showed the creation of 256,000 new jobs. Future decisions by the Fed will depend on forthcoming data. In fact, the market is pricing in a 97.3% probability, according to CME Group’s FedWatch tool, that the Fed will pause its monetary easing process during its meeting on January 29.

The narrative of ‘higher yields for longer’ is likely here to stay, with the central bank in a position to be patient until something changes in the economy. Investors should stay alert to any significant revisions, considering that January could bring seasonal factors that may introduce uncertainty into the figures.

Higher Yields Impact

Higher yields are generally not good for stocks because they make borrowing money more expensive. When interest rates rise, companies face higher costs for financing their operations or expansion through loans. This can reduce their profits and growth potential, which investors tend to view negatively.

Additionally, when yields rise, bonds become more attractive because they offer better returns compared to stocks. This often leads investors to shift their money from stocks to bonds, causing stock prices to fall.

Nvidia Drops Sharply on Wall Street After Dispute with Biden Administration

Posted on January 13, 2025 by Ignacio Teson

Nvidia’s criticism of Biden’s new regulations and its support for Trump highlight the growing tension over the future of AI technology in the U.S. This has negatively impacted its stock and created uncertainty in the global market.

Nvidia’s shares dropped nearly 4% on Monday as the chipmaker opposed a last-minute attempt by the Biden administration to impose new AI regulations. The company explicitly called on President-elect Donald Trump to reject these policies.

[[NVDA/USD-graph]]

Nvidia harshly criticized the Biden administration and praised Trump in a press release on Monday in response to new export restrictions targeting the company’s coveted AI chips. This criticism coincided with a rare losing streak for Nvidia on Wall Street and growing support for Trump in Silicon Valley.

Nvidia’s stock fell as much as 4.7%, reaching $129.51 shortly after the market opened, as pressure on its international business intensified, further driving down its stock price.

New Regulatory Framework

On Monday, President Joe Biden announced a regulatory framework aimed at controlling the transfer of AI technology, primarily targeting Nvidia. The goal is to limit AI chip exports to foreign countries and companies.

The White House justified the move as an effort to keep advanced AI systems out of the reach of “concerned countries,” citing concerns about China’s use of U.S. technology during Biden’s administration.

The possibility of export restrictions poses a challenge for Nvidia, as China, Singapore, and Taiwan accounted for more than half of its $35 billion revenue in the last financial quarter, with China contributing $5.4 billion.

Rejection and Trump Support

In a strong statement, Nvidia rejected the new regulations: “Biden’s new rules will only weaken the global competitiveness of the U.S., undermining the innovation that keeps us at the forefront,” said Ned Finkle, Nvidia’s vice president of government affairs, arguing that it is an attempt by the White House to “manipulate market outcomes and stifle competition.”

Nvidia’s statement also reflected support for Trump, noting that “Trump’s first administration laid the foundation” for the recent AI revolution. The stock had fallen more than 15% since its all-time high last week, erasing up to $578 billion in market capitalization from its peak valuation of $3.75 trillion.

Wall Street Tumbles Amid Expectations of Fewer Rate Cuts

Posted on January 10, 2025 by Ignacio Teson

Wall Street’s three major indices ended the week with sharp losses, driven by stronger-than-expected U.S. labor market data that reduced expectations for further interest rate cuts this year.

The Dow Jones Industrial Average, which tracks 30 blue-chip stocks, dropped 1.63% to 41,938.45 points. The S&P 500, comprising the 500 largest companies, slid 1.54% to 5,827.04 points, while the tech-heavy Nasdaq Composite declined 1.63% to 19,161.63 points.

[[SPX-graph]]

The U.S. Department of Labor reported the creation of 256,000 nonfarm jobs in December, exceeding forecasts and up from 212,000 in November. The unemployment rate also fell to 4.1% from 4.2%, reinforcing the view of a resilient labor market.

This robust jobs data fueled concerns that inflation may persist longer, prompting investors to reassess the likelihood of rate cuts in 2025. The outlook also weighed on technology stocks, which are particularly sensitive to high-interest-rate environments. Nvidia led the sector’s losses, falling 3% on Friday and accumulating a weekly decline of 5.93%.

Overall Performances

Other sectors posted steep losses as well, with real estate (-2.46%), financials (-2.45%), and technology (-2.23%) seeing the largest declines. Among Dow components, Travelers (-4.25%), Goldman Sachs (-3.5%), and American Express (-3.2%) suffered the biggest drops.

For the week, the Dow Jones fell 1.86%, the S&P 500 lost 1.94%, and the Nasdaq Composite declined 2.34%, capping a challenging week for equity markets.

Oil Market

Oil prices climbed more than 3% on Friday, hitting their highest level in three months, as markets braced for potential supply disruptions following expanded U.S. sanctions targeting Russia’s oil and gas revenues.

The Biden administration introduced new sanctions aimed at Russian oil producers, vessels, intermediaries, and ports. The measures are designed to disrupt all stages of Moscow’s oil production and distribution chains, intensifying pressure on the country’s energy sector.

Mexican Peso Drops for the Fourth Straight Session

Posted on January 10, 2025 by Ignacio Teson

Affected by the strengthening U.S. dollar following robust labor market data, the Mexican peso extended its losing streak this Friday, depreciating for the fourth consecutive session and ending a negative week.

The exchange rate closed at 20.7052 pesos per dollar, compared to Thursday’s official closing of 20.4982 pesos, according to data from Banco de México (Banxico). This represents a depreciation of 20.70 cents, or 1.01%.

[[USD/MXN-graph]]

During the session, the dollar traded between a high of 20.7499 pesos and a low of 20.4817 pesos. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.45% to 109.66 points.

Strong U.S. Jobs Report Weighs on the Peso

The U.S. Department of Labor reported the creation of 256,000 nonfarm jobs in December, surpassing analysts’ expectations and significantly higher than November’s revised figure of 212,000. The unemployment rate also ticked down to 4.1% from 4.2%.

This data fueled speculation that the Federal Reserve (Fed) will likely delay interest rate cuts until at least June, marking the end of its easing cycle. Before the report, markets anticipated a potential rate cut as early as May, with a 50% chance of a second reduction by year-end.
Markets Eye Trump’s Return to Presidency

Market volatility remains high as the date approaches for Donald Trump to retake office as U.S. President. Traders are closely monitoring his statements for indications of future policies.

Weekly Performance

After four straight sessions of losses, the [[USD/MXN]] registered a slight weekly decline. It closed last Friday at 20.6724 pesos per dollar, marking a loss of 3.28 cents or 0.16% for the week.

Earlier this week, the peso rallied briefly following a report by The Washington Post suggesting that Trump might limit his tariff policies to critical imports. However, the optimism was short-lived as Trump quickly dismissed the report, dampening market sentiment.

Bitcoin: Fidelity Bets on Mass Adoption in 2025

Posted on January 10, 2025 by Ignacio Teson

Fidelity Investments, through its crypto-focused arm Fidelity Digital Assets (FDA), has highlighted the proposal for a strategic U.S. Bitcoin reserve, put forward by President-elect Donald Trump.

This move, if implemented, may signal a significant shift in the way nations and institutions view Bitcoin’s role in their financial strategies.

The digital assets sector experienced two significant accelerations in 2024. The first was the approval of exchange-traded products (ETPs) early in the year, which broadened access to cryptocurrencies.

The second wave of momentum followed Trump’s presidential election victory, which brought optimism about potential crypto-friendly legislation. Fidelity analysts believe these developments have laid the foundation for Bitcoin’s increasing institutional adoption and rising prices.

Fidelity Report

In its report, “2025 Look Ahead: Is it Too Late to Enter Digital Assets?”, Fidelity emphasizes that institutional adoption is currently the most critical driver of cryptocurrency market growth.

While the approval of spot Bitcoin ETFs in 2024 initiated this trend, the real transformation will occur when nations and institutions begin treating Bitcoin as a strategic asset. Hogan anticipates that 2025 will mark a turning point, with more governments, central banks, sovereign wealth funds, and national treasuries establishing significant Bitcoin reserves.

[[BTC/USD-graph]]

Fidelity’s report highlights that, as of now, the United States leads sovereign Bitcoin holdings with $20 billion, followed closely by China with $19.2 billion. Other notable holders include the United Kingdom with $6.2 billion, Ukraine with $4.7 billion, Bhutan with $1.2 billion, and El Salvador with $604 million.

Key Drivers of Optimism

Fidelity’s optimism is underpinned by macroeconomic conditions that historically support Bitcoin’s growth. Geopolitical tensions and inflation concerns remain prevalent, making Bitcoin an attractive hedge against traditional market volatility and currency devaluation.

With growing institutional interest and the potential for state-level investments, Fidelity predicts that 2025 will be a pivotal year for Bitcoin, marking its transition from a speculative asset to a cornerstone of global financial systems.

Bitcoin Resumes Upward Trend, Nears $93,500

Posted on January 10, 2025 by Ignacio Teson

After a recent dip, cryptocurrencies are back on an upward trajectory, with Bitcoin gaining 1.5% to $93,514.87 on Friday, January 10. Altcoins are also mostly in the green, led by Cardano, which is up 3.2%.

Bitcoin’s sentiment has faced challenges this month due to volatility, as bullish efforts failed to reclaim and sustain the critical $100,000 level.

[[BTC/USD-graph]]

Indicators of Market Sentiment

A key signal of investor sentiment, the Spent Output Profit Ratio (SOPR), has declined, reflecting increasing capitulation among speculative investors. The SOPR measures the profitability of Unspent Transaction Outputs (UTXO) by comparing the last price a coin was moved to its current value.

For short-term holders (STH)—investors who hold BTC for up to 155 days—the SOPR has dropped below the breakeven point of 1, currently standing at 0.987. This indicates that many short-term holders are selling at a loss, a bearish signal for the market.

As Bitcoin’s price fell, negative sentiment became more prominent, especially on platforms like YouTube and news outlets. Analysts suggest that this underscores a growing bearish outlook among short-term traders.

Despite the challenges, [[BTC/USD]] current price movement suggests the market is attempting to regain bullish momentum, with eyes set on the $95,000 level as the next key resistance.

Limited Rate Cuts in 2025

Adding to the cautious market sentiment, several major banks have revised their forecasts, signaling that further interest rate cuts in 2025 are unlikely. This shift in expectations follows stronger-than-anticipated economic data and inflationary pressures in key global economies.

These projections could weigh on cryptocurrency markets, as lower rate cuts limit liquidity, a key driver of Bitcoin’s past rallies. Analysts believe that while Bitcoin’s recent uptrend is encouraging, macroeconomic uncertainty and reduced monetary easing may temper bullish momentum throughout the year.

Brazil Tourism Hits Record Year Amid Depreciation

Posted on January 10, 2025 by Ignacio Teson

In 2024, Brazil welcomed a historic 6,657,377 foreign tourists, marking a 12.6% growth compared to 2023. Argentinians topped the list of visitors, followed by tourists from the United States and Chile.

According to data from Brazil’s Ministry of Tourism, Embratur, and the Federal Police, 690,236 foreigners visited in December alone, an 11.1% increase over December 2023, making it the third-best December since records began in 1995.

Tourism Minister Celso Sabino attributed this success to strategic international marketing campaigns, destination development, and strengthened global partnerships. “These efforts have highlighted Brazil’s natural landscapes and rich cultural heritage,” Sabino stated.

Foreign tourist spending reached $6.62 billion by November 2024, a 5.3% increase over 2023 and surpassing the same period in 2014, when Brazil hosted the FIFA World Cup.

Currency Depreciation

One key factor behind this record-breaking year was the depreciation of Brazil’s currency, the real (BRL). The exchange rate reached historic highs, making Brazil one of the most affordable destinations for foreign travelers. Tourists were able to maximize their spending, with lower costs for accommodations, dining, and activities compared to other destinations.

At this moment, each U.S. Dollar is worth more than 6 Brazilian Reais.

[[USD/BRL-graph]]

The depreciation of the real was largely driven by excessive government spending, which increased concerns about fiscal sustainability. When governments spend beyond their means without sufficient revenue, it often leads to higher public debt. This undermines investor confidence, prompting a sell-off of the local currency, which in turn weakens its value.

In Brazil’s case, the increased public spending fueled fears of inflation and reduced the attractiveness of holding the real compared to stronger foreign currencies, such as the U.S. dollar. This depreciation, while a challenge for the local economy, made Brazil significantly cheaper for international visitors, contributing to the surge in tourism.

Mexican Peso Retreats Following Local Inflation Data

Posted on January 9, 2025 by Ignacio Teson

The Mexican peso depreciated against the U.S. dollar in Thursday’s trading, weighed down by local inflation data and low market liquidity due to the closure of U.S. markets.

The exchange rate ended the day at 20.4982 pesos per dollar, marking a decline of 8.18 centavos, or 0.40%, compared to the previous official close of 20.4164 pesos, according to Banco de México (Banxico). During the session, the dollar traded within a range of 20.4010 to 20.5241 pesos.

[[USD/MXN-graph]]

Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.14% to 109.15 points.

Inflation Data and Monetary Policy

Mexico’s annual inflation slowed in December to 4.21%, its lowest level since February 2021, but core inflation rose to 3.65%, reversing a 22-month decline. This mixed inflation data has raised expectations that Banxico will continue its rate-cutting cycle, diverging from the more hawkish stance of the U.S. Federal Reserve.

Minutes from Banxico’s recent meeting revealed that the central bank is open to considering larger rate cuts in future sessions. In December, Banxico reduced its benchmark rate by 25 basis points, marking the fifth cut of the year.

The [[USD/MXN]] weakness reflects these inflation figures, along with speculation about Banxico’s monetary easing, with the exchange rate testing its first resistance level at 20.50 pesos per dollar.

Stock Market Performance

In contrast to the currency’s decline, Mexican stock markets closed with gains during the low-volume session as Wall Street remained closed in observance of a day of mourning for former U.S. President Jimmy Carter.

The S&P/BMV IPC, the benchmark index of the Mexican Stock Exchange, rose 0.35% to 49,807.96 points, while the FTSE BIVA index increased 0.36% to 1,008.78 points.

The Pound Hits Its Lowest Level in 14 Months

Posted on January 9, 2025 by Ignacio Teson

The pound sterling fell on Thursday to its lowest level since late 2023, weighed down by a global bond sell-off that pushed U.K. government borrowing costs to their highest in 16 years.

Concerns about the country’s fiscal outlook have appeared. The pound was down 0.5% at $1.2305, after plunging 1.6% yesterday to its weakest point since November 2023. Meanwhile, the cost of hedging against price swings over the next month surged to its highest since the banking crisis of March 2023.

[[GBP/USD-graph]]

Global bond yields spiked this week amid fears of rising inflation, diminishing chances of interest rate cuts, uncertainty over how U.S. President-elect Donald Trump will handle foreign or economic policy, and the prospect of trillions in additional debt.

U.K. 10-year government bond yields, or gilts, jumped by a quarter-point this week alone, reaching their highest levels since 2008 as confidence in Britain’s fiscal outlook deteriorates. By Thursday afternoon in London, some selling pressure had eased, leaving yields flat around 4.81%.

Finance Minister Rachel Reeves faces her first major test as the bond market turmoil threatens to force spending cuts.

Bond Yields Gilts

Ordinarily, rising bond yields would support the pound, but this relationship has broken down, reflecting investor unease over the country’s financial stability.

The bond market is starting to discipline the U.K. government. Right now, they are trying to fight the market, and that never ends well.

In a statement issued late Wednesday, the U.K. Treasury pledged to maintain “firm control” over public finances in response to the mounting pressures.