Background on the Situation
The Mexican peso has weakened against the US dollar on Tuesday due to global dollar strength, fueled by uncertainty surrounding the ongoing partial shutdown of the US federal government, now in its seventh day.
Market Performance
The exchange rate ended the day at 18.3945 pesos per dollar, marking a decrease of 4.71 centavos (0.27%) compared to the official closing rate of 18.3474 pesos from the previous day, according to official data from Banco de México (Banxico).
The dollar’s price fluctuated between a high of 18.4158 pesos and a low of 18.3323 pesos. Meanwhile, the Intercontinental Exchange’s Dollar Index (DXY), which compares the US dollar to a basket of six currencies, increased by 0.48% to 98.59 points.
Impact of US Government Shutdown
The closure of US public sector activities has delayed the release of crucial economic information, including the non-farm payroll report, a significant indicator for the Federal Reserve’s decision-making process.
Market participants anticipate the release of minutes from the most recent Federal Reserve meeting, where the central bank lowered its benchmark rate by 25 basis points. Earlier today, Governor Stephen Miran stated that the calm in the bond market supports a more aggressive rate cut.
Locally, traders are looking forward to inflation data and the minutes from Banxico’s latest meeting, scheduled for Thursday. This information becomes more critical given the scarcity of references in the US due to the federal government shutdown.
Expert Analysis
Felipe Mendoza, an analyst at ATFX, commented: “The movement reflects a cautious session with covering actions in an international environment marked by trade tensions and anticipation for upcoming inflation data and the Banco de México’s policy meeting minutes.”
Key Questions and Answers
- What is causing the Mexican peso to weaken against the US dollar? The primary reason is global dollar strength, driven by uncertainty surrounding the ongoing partial shutdown of the US federal government.
- How has the US government shutdown affected economic data release? The closure of US public sector activities has delayed the release of crucial economic information, including the non-farm payroll report.
- What is the significance of the Federal Reserve’s rate cut? The 25-basis-point reduction in the benchmark rate is a response to market conditions and supports a more aggressive monetary policy stance.
- Why is local data more critical during the US government shutdown? With limited references available from the US due to the federal government shutdown, local economic data such as inflation and Banxico meeting minutes become more important for market participants.
