Overview of the Mexican Peso’s Recent Appreciation
The Mexican peso experienced a surge against the U.S. dollar on Tuesday, reaching levels unseen since October. This appreciation was fueled by the weakening of the U.S. dollar following lower-than-expected inflation figures from the United States.
Key Market Movements
- The Mexican peso advanced to a level of 19.3926 units per dollar, marking a significant increase from the previous day’s closing rate of 19.6039 units, according to data from Banco de México (Banxico).
- This translates to a gain of 21.13 centavos, or 1.08%, for the peso.
- The dollar’s price fluctuated between a high of 19.6405 units and a low of 19.3757 units.
- The DXY, or Intercontinental Exchange’s Dollar Index, which compares the U.S. dollar to six reference currencies, dropped by 0.83% to 100.97 points.
U.S. Inflation and Interest Rates
The U.S. Consumer Price Index increased by 2.3% annually in April, falling short of the consensus estimate of 2.4%. The core inflation rate rose to 2.8% annually, aligning with analysts’ expectations and remaining unchanged from the previous month.
Although these figures suggest that the Federal Reserve may pause its rate-cutting cycle, they also indicate a limited impact from President Donald Trump’s recent trade policies.
Anticipation of Banxico’s Policy Decision
Domestically, market participants are closely watching the upcoming monetary policy decision by Banxico on Thursday. Market expectations widely anticipate another half-percentage point reduction in lending costs, marking the third consecutive cut of this magnitude.
“The dollar is weakening against the peso once again,” said Alexander Londoño, an analyst at digital broker ActivTrades. “Daily candlestick lows for the exchange rate have been consistently lower, signaling that the parity may continue to decline.”
Key Questions and Answers
- Q: What caused the Mexican peso to appreciate against the U.S. dollar? A: The peso gained ground due to a weakening U.S. dollar following lower-than-expected inflation data from the United States.
- Q: How did U.S. inflation figures perform compared to expectations? A: The U.S. Consumer Price Index increased by 2.3% annually in April, which was below the consensus estimate of 2.4%. Core inflation rose to 2.8% annually, aligning with analysts’ expectations.
- Q: What are market participants focusing on domestically? A: Domestic attention is centered on Banxico’s upcoming monetary policy decision, with widespread expectations of another half-percentage point reduction in lending costs.
