Background on Jerome Powell and the Federal Reserve
Jerome Powell, the current Chair of the Federal Reserve (Fed), has been under scrutiny due to criticisms from U.S. President Donald Trump regarding his management of the central bank and the decision not to cut interest rates.
Trump had previously expressed concerns about the potential economic slowdown in the U.S. and called Powell a “loser” on his social media platform, Truth Social. However, Trump recently announced that he has no intention of firing Powell, which brought relief to investors.
Positive Outlook on U.S.-China Trade Negotiations
Another factor contributing to the Mexican peso’s appreciation is the optimistic outlook on the potential trade agreement between the U.S. and China, which would alleviate ongoing tariff tensions between the two nations.
Trump stated on Tuesday that he would be “kind” in negotiations with China, fueling expectations of a successful resolution.
Local Data and Market Expectations
In local news, retail sales data for February showed a fourth consecutive monthly increase, though the growth was less than market expectations. On an annual basis, retail sales fell by 1.1% in February.
Additionally, Citibanamex’s market survey for the first half of April in Mexico indicated a near-unanimous expectation of a 50 basis point reduction in the local reference rate to 8.50% in May.
Renato Campos, an analyst at Squared Financial, commented on the currency’s reaction to potential U.S. recession or stagflation, while noting Mexico’s relatively stable indicators and the likelihood of further Banxico rate cuts.
Mexican Peso Performance
The spot exchange rate for the Mexican peso against the dollar is currently at 19.5696, marking an improvement of 8.34 centavos (0.42%) compared to the previous day’s official closing rate of 19.6530.
The dollar’s range is between a maximum of 19.6576 pesos and a minimum of 19.4695 pesos.
The DXY, or Intercontinental Exchange’s Dollar Index, which measures the dollar against a basket of six major currencies, increased by 0.55% to reach 99.52.
Key Questions and Answers
- What is the current situation with the Mexican peso and the U.S. dollar? The Mexican peso continues to appreciate against the U.S. dollar, reaching a minimum of 19.46 pesos per dollar.
- Why is the Mexican peso appreciating? The peso’s rise is attributed to a more favorable market environment following Trump’s announcement that he won’t fire Fed Chair Jerome Powell. Additionally, expectations of a U.S.-China trade deal and local data factors also contribute to the peso’s appreciation.
- What are the local data factors influencing the peso? Retail sales in Mexico grew for the fourth consecutive month in February, though less than expected. Moreover, market expectations point to a 50 basis point rate cut by Banxico in May.
- How did Trump’s comments on Jerome Powell affect the markets? Trump’s previous criticisms of Powell and threats to fire him caused investor concerns about the Fed’s autonomy. His recent statement that he won’t dismiss Powell eased these worries.
