Trade Relations Between China and the U.S. Show Improvement
The Mexican peso closed stable against the U.S. dollar on Wednesday’s session, after testing its best level since October, supported by a more optimistic mood among investors following comments from U.S. President Donald Trump.
The exchange rate closed the day at 19.6502 pesos per dollar, marginally up by 0.01% compared to the official rate of 19.6530 pesos reported on Tuesday, according to data from Mexico’s central bank (Banxico). The dollar traded within a range, with a high of 19.6768 pesos and a low of 19.4695 pesos.
The Dow Jones Index Rises
The Intercontinental Exchange’s Dollar Index (DXY), which compares the dollar to six major reference currencies, rose 0.94% to 99.91 units at the close.
Optimism Around U.S.-China Trade Relations
Midweek optimism in the markets was fueled by expectations that the U.S. and Chinese governments would soon reach an agreement to end trade tensions. Trump told reporters on Tuesday that he would be “very kind” in negotiations with Beijing.
Media reports also contributed to investor optimism, suggesting that the U.S. might reduce tariffs on China to ease tensions. However, the Trump administration clarified that this decision is yet to be confirmed.
Federal Reserve and Mexican Indicators
Another positive factor was Trump’s statement that he would not attempt to fire Federal Reserve Chair Jerome Powell, following Trump’s strong criticism of Powell’s management and the central bank’s decision not to cut interest rates. This statement calmed the market.
On the local front, a report showed that retail sales grew for the fourth consecutive month in February, though less than expected. This week, investors await inflation and the Indicador Global de la Actividad Económica (IGAE) figures.
“Strong readings could validate the recent strength for the Mexican peso, while continued weakness might put downward pressure on the local currency,” said Quásar Elizundia, market research strategist at Pepperstone.
Key Questions and Answers
- What is the current status of the Mexican peso against the U.S. dollar? The Mexican peso closed stable against the U.S. dollar on Wednesday, after reaching its best level in six months.
- What factors contributed to the Mexican peso’s improvement? Optimism around improved trade relations between China and the U.S., as well as Trump’s statement that he would not fire Federal Reserve Chair Jerome Powell, supported the Mexican peso.
- What are the expectations for U.S.-China trade negotiations? Markets expect an agreement between the U.S. and China to end trade tensions soon, driven by Trump’s comments about being “very kind” in negotiations with Beijing.
- What recent developments impacted the Mexican economy? Retail sales grew for the fourth consecutive month in February, although less than anticipated. Investors await inflation and IGAE figures for further insights into the Mexican economy.
