• The Mexican peso made gains 
• Poll results provide further boost
• Brazil struggles to keep it real

The Mexican peso made gains Tuesday and continued its ascent up live forex charts Wednesday, as April economic data boosted sentiment around the Latin American currency. The report showed solid 4.7 percent growth year-on-year with the agricultural sector leading the way after it rebounded from last year’s crippling drought. 

The national statistical bureau reported that the agricultural sector had upped production by 8.5 percent year-on-year, with high-value products associated with transportation and the oil industry keeping the Mexican economy strong.

Despite fear spreading amongst traders ahead of an EU summit at the end of this week which promises precious little resolution for the spiralling debt crises across the single currency bloc, expert commentators feel confident that the positive data will stand Mexico in good stead. “The country’s macro-economic fundamentals are able to withstand the whirlwind emanating from Europe”, said John T. Sullivan (pictured), market analyst with Thomson Reuters in an emailed note to this site. “The Mexican peso has recouped much of its May losses when it was used as a proxy currency to hedge Latin American currency exposure.  The peso’s liquidity and 24-hour trading stature makes it susceptible to the vagaries of the risk-on/off trade.”

Poll results provide further boost

Also serving to bolster sentiment around the peso was Tuesday’s poll of citizens ahead of upcoming presidential elections. The poll revealed that the front-runner in the election, Enrique Pena Nieto, could also win a majority in Congress, paving the way for rapid economic reforms.

"The polls are in of Pena Nieto and the people are happy that reforms will finally come," said Alfredo Puig, a trader at brokerage Vector in Monterrey, Mexico. And markets are similarly relieved by the prospect of clear and succinct economic reform should the election play out as polls suggest. Mexico's currency strengthened 1.11 percent to 13.755 per dollar on the poll results yesterday.

The poll by Consulta Mitofsky said that Pena Nietos’ party (the Institutional Revolutionary Party (PRI)) stood to win between 274 and 304 seats in the 500-member lower house of congress and between 66 and 73 spots in the 128-member Senate. The early forecasts have come as such a relief to investors and citizens alike, because division in congress has succeeded in blocking economic reform since the early 1990s with the effect of slowing the nation’s growth trajectory. But with majority of members on side, it is now hoped that Pena Nieto will push through much-needed fiscal, energy and labour reforms. 

Brazil struggles to keep it real

Elsewhere in Latin America, the currency story was not such a pretty one for the first three trading days he week. The real traded 0.31 percent lower after the central bank announced Wednesday that it will sell up to 60, 000 currency swaps. In equivalent trading terms, the sale will have a similar effect to the sale of dollars in the futures markets.

A series of data released yesterday also showed that the nation will struggle even to grow faster than last year’s meagre 2.7 percent rate. Reticent forex brokers and traders now expect to see a further lowering of interest rates and a weakening of the currency in order to boost the struggling economy, predictions which are currently weighing on the currency.

And fears over the future of the euro zone are, of course, not limited to the euro zone itself. The Latin American currencies all – except the peso - remain pressured by the currency bloc’s chronic debt issues. The build-up to the impending EU summit has so far done little to quell investor fear. "Markets are awaiting the European summit later in the week. There is talk about the creation of a super minister of finance to solve the problems of the euro zone, but for now there is a lot of concern," said Rodrigo Sarria, a trader at Celfin Capital in Santiago.

Sarah Cox, Markets Writer. ForexSpace.com