Mexico’s peso leads Latinamerica FX losses as GDP misses estimates

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Source: Reuters 

(Reuters) – Mexico’s peso led losses across Latin American on Wednesday as second-quarter GDP data missed expectations and raised fears of slowing growth, while most other currencies fell as concerns over the Delta coronavirus variant returned to fore.

The peso fell 0.6% as second-quarter economic growth came in at 1.5%, slightly below expectations of 1.7%. The Mexican economy also shrank in June from May.

The reading, coupled with a recent spike in Mexican COVID-19 cases has made the peso appear less attractive than some its high-yielding emerging market peers.

A drop in Mexican inflation in the first half of August also lowered the chance of an interest rate hike by the central bank. “Even prior to the current crisis, the country’s economy had been under pressure, contracting in six of the eight quarters leading up to the pandemic,” said Matthew Ryan, senior market analyst at Ebury.

“The recovery has, however, not been quite as rapid as many of Mexico’s peers. We think this is partly a consequence of the government’s unwillingness to increase fiscal spending.”

Source: Reuters