The recent decision of the Federal Reserve (Fed) of the United States and other central banks on the rise in interest rates, as well as the armed conflict in Russia and Ukraine, caused the markets to sink due to fears of a possible global recession prompting investors to seek refuge in the dollar, propelling the greenback to new highs in more than two decades.
The euro and sterling tumbled to new 20- and 37-year lows on Friday against a rising dollar, after data showed the slowdown in business activity in the euro zone and Britain deepened this month and economies will probably go into recession.
The Mexican Stock Exchange (BMV) and the peso were no strangers and closed in negative territory.
The Mexican currency closed the session on Friday at a price of 20.23 pesos per dollar, according to information from the Bank of Mexico (Banxico).
This fall represents the interruption of three weeks in a row where the national currency advanced against the dollar.
In the weekly comparison, the Mexican peso registered a depreciation of 1.42 percent against the US currency, according to data from Banxico.
The BMV’s Price and Quotation Index registered a drop of 2.0% to 45,395.94 points, while the Institutional Stock Exchange (BIVA) closed activities with a depreciation of 1.98 percent to 949.62 units.
For its part, West Texas Intermediate (WTI) oil ended operations with a drop of 5.70 percent at a price of 78.74 dollars per barrel. The Mexican mix has not yet reported the closing price; however, as of September 22, it recorded a drop and a price of 80.20 dollars per barrel
They warn of lower investments
“Investment could slow down significantly because most central banks raised their interest rates, which makes credit or refinancing more expensive (…) companies will increase their costs and it will affect consumption,” warned the Deputy Director of Economic Analysis of Grupo Financiero Monex, Janeth Quiroz, in an interview with El Sol de México.
He explained that the decisions of the central banks sent a negative signal to the market that rates will continue to increase. “Fed Chairman Jerome Powell said they would be willing to face a recession as long as inflation is brought under control,” he said.
In addition, he lamented that “the Mexican peso was the seventh currency with the highest depreciation worldwide.”
The director of Economic Analysis of Banco BASE, Gabriella Siller, the global market estimates that given the rise in interest rates by the Fed and other central banks, world economic growth will be compromised, which would cause less investment in Mexico and the world.
“Higher interest rates globally raise the risks of an economic slowdown,” Siller said in an analysis.
Regarding geopolitical tensions, Gabriella Siller pointed out that during Friday’s session the voting began in a referendum organized by the Russian government for the annexation of four Ukrainian territories: Donetsk, Lugansk, Kherson and Zaporizhzhia.
He added that Russian President Vladimir Putin had announced the preparation of 300,000 reservists for the war in Ukraine, sending a signal to the markets that the war is not over and there could be further disruptions in the commodity markets.
“War is also a risk factor for global economic growth,” said the specialist.