Background on Key Figures and Context
The Mexican peso has shown resilience, appreciating against the US dollar for the fifth consecutive day on Friday. This strengthening is attributed to expectations of interest rate cuts by the US Federal Reserve (Fed) and optimism surrounding trade negotiations between China and the United States.
Howard Lutnick, the US Secretary of Commerce, announced on Friday that a trade framework between Washington and Beijing had been finalized. He also mentioned that the Trump administration anticipates near-term agreements with ten significant trading partners. Meanwhile, the Personal Consumption Expenditure (PCE) price index data was released in the morning. The inflation reference for the Fed increased by 0.1% month-to-month in May and rose 2.3% year-over-year, aligning with expectations.
Donald Trump‘s administration and recent comments from Fed officials support the belief that there will be a 75 basis points reduction in US interest rates this year. This notion was further reinforced by a larger-than-expected GDP contraction.
Factors Driving Peso’s Appreciation
Throughout the week, the peso has benefited from reduced risk aversion following US President Trump’s announcement of an end to hostilities between Israel and Iran. Compared to the previous Friday’s close of 19.1683, the peso gained 31.54 centavos or 1.65%, according to official data from Banco de México (Banxico).
Miguel Ángel Elizondo, a market analyst at Capitaria, highlighted the peso’s continued strength, noting nearly 1.9% appreciation over the past thirty days. He emphasized that, without further developments in the Middle East conflict, market participants will focus on ongoing trade negotiations set to conclude on July 9.
Market Reactions and Expert Opinions
Eduardo Ramos, an analyst at VT Markets, expressed optimism about the peso’s future performance: “Under current conditions, it wouldn’t be surprising to see another ‘superpeso’ again, but the market will ultimately decide.”
Key Questions and Answers
- What factors contributed to the Mexican peso’s appreciation? The peso strengthened due to expectations of US interest rate cuts and optimism surrounding China-US trade negotiations.
- Who announced the finalization of a trade framework between the US and China? Howard Lutnick, the US Secretary of Commerce, made this announcement.
- What recent data supported the belief in US interest rate cuts? The Personal Consumption Expenditure (PCE) price index data showed a 0.1% month-to-month increase in May and a 2.3% year-over-year rise, aligning with expectations.
- What did Miguel Ángel Elizondo, a market analyst at Capitaria, say about the peso’s performance? Elizondo noted the peso’s continued strength, with nearly 1.9% appreciation over the past thirty days, and emphasized that market participants will focus on ongoing trade negotiations.
- What did Eduardo Ramos, an analyst at VT Markets, predict about the peso’s future performance? Ramos expressed optimism, suggesting that another significant appreciation (“superpeso”) could occur under current conditions.
