Background on Key Figures and Institutions
The Mexican peso weakened against the U.S. dollar in Friday’s trading session. The local currency retreated following a technical rebound after gaining momentum from the weakening U.S. dollar and expectations of adjustments to interest rates by the Federal Reserve (Fed).
Exchange Rate Movements and Economic Indicators
The exchange rate concluded the day at 18.4411 units per dollar, down from a previous record of 18.3952 units reported by the Bank of Mexico (Banxico). This represented a decrease of 4.59 centavos, or 0.25%, for the peso.
The dollar’s price fluctuated between a high of 18.4641 units and a low of 18.3434 units. The Dollar Index (DXY) from the Intercontinental Exchange, which compares the U.S. currency to a basket of six currencies, fell by -0.03% to 98.91 points.
The U.S. Consumer Price Index (CPI) increased by 0.3% in September, according to the Bureau of Labor Statistics within the Department of Labor. Over the 12 months leading up to September, the index rose by 3.0%, both figures lower than anticipated.
Impact of U.S. Government Shutdown on Economic Data
These economic data points have been the first major official publication from the U.S. since it entered a government shutdown lasting 23 days. During this period, the release of crucial labor market indicators vital for monetary policy has been suspended.
Market Expectations for Interest Rate Adjustments
According to the FedWatch tool from CME, which tracks futures trading on federal funds rate adjustments, market operators anticipate a 25-basis-point adjustment to interest rates with 96.7% probability in the upcoming Federal Reserve meeting on October 28th and 29th.
Peso’s Performance Over the Past Week
After appreciating earlier in the week, the exchange rate rebounded to close with a loss for the peso. With a previous weekly high of 18.3899 units on the preceding Friday, the peso experienced an accumulated decline of 5.12 centavos, or 0.28%,.
Banco Base, a local firm, noted in their report: “The exchange rate’s behavior indicates that it has entered a consolidation phase within the 18.30 to 18.60 channel. Oscillators show that downward pressure on the currency’s quotation has diminished.”
Key Questions and Answers
- What caused the Mexican peso to weaken against the U.S. dollar? The peso weakened due to a technical rebound following gains from the weakening U.S. dollar and expectations of interest rate adjustments by the Federal Reserve.
- What were the movements in the dollar’s price range? The dollar’s price fluctuated between a high of 18.4641 units and a low of 18.3434 units.
- How did recent U.S. economic data impact the peso? The U.S. Consumer Price Index increased by 0.3% in September and rose 3.0% over the past 12 months, both lower than expected. This data has been the first major official publication from the U.S. since its government shutdown, which led to the suspension of crucial labor market indicators.
- What are market expectations for the upcoming Federal Reserve meeting? Market operators anticipate a 25-basis-point adjustment to interest rates with 96.7% probability in the upcoming Federal Reserve meeting on October 28th and 29th.
- How did the peso perform over the past week? The peso appreciated earlier in the week but experienced an overall loss, declining by 5.12 centavos or 0.28% since the previous Friday’s high of 18.3899 units.
