Background on Banco de México and its Influence
Banco de México (Banxico), the central bank of Mexico, plays a crucial role in maintaining price stability and fostering sustainable economic growth. Its decisions on interest rates significantly impact the Mexican peso’s value against foreign currencies, such as the US dollar.
Recent Developments and Their Impact
On this particular Thursday, the Mexican peso experienced a slight depreciation against the US dollar. The local session was marked by lower-than-expected inflation figures and a moderation in interest rate cuts by Banxico.
- Exchange Rate: The exchange rate closed at 18.6368 pesos per dollar, a decrease of 2.26 centavos (0.12%) compared to the previous day’s rate of 18.6142 pesos, according to official data from Banxico.
- Dollar Movement: The dollar’s value fluctuated between a high of 18.7357 pesos and a low of 18.5904 pesos.
- DXY Index: The Intercontinental Exchange’s Dollar Index (DXY), which compares the US dollar to six reference currencies, fell by 0.13% to 98.10 points.
Banxico’s Interest Rate Decision
Banxico announced a 25-basis-point reduction in its key interest rate to 7.75%, a divided decision. This brought the reference rate to its lowest level in three years, and Banxico indicated that further adjustments might be necessary.
Inflation Data and its Implications
Prior to Banxico’s rate decision, the National Institute of Statistics and Geography (INEGI) released inflation data showing a moderation in the consumer price index to 3.51% in the previous month, its lowest reading since December 2020.
- Consumer Price Index: The consumer price index showed a decrease, signaling a potential slowdown in inflationary pressures.
- Underlying Inflation: The underlying inflation, however, remained above Banxico’s target at 4.23%.
Analyst Perspectives
According to analysts at Banorte, the peso is expected to experience a technical rebound after respecting resistance levels near 18.58 pesos. The nearest support level is currently at 18.74 pesos, suggesting that maintaining positions could be advisable.
Key Questions and Answers
- What is the current state of the Mexican peso against the US dollar? The Mexican peso weakened slightly against the US dollar on this Thursday, closing at 18.6368 pesos per dollar.
- What factors contributed to the peso’s depreciation? Lower-than-expected local inflation figures and a moderation in interest rate cuts by Banxico played a role in the peso’s depreciation.
- What did Banxico announce regarding interest rates? Banxico reduced its key interest rate by 25 basis points to 7.75%, a divided decision, and signaled potential future adjustments.
- How did recent inflation data impact the peso? The consumer price index showed a decrease to 3.51%, while underlying inflation remained above Banxico’s target at 4.23%.
