Market Overview and Key Factors
The Mexican peso experienced a minor decline against the US dollar on Monday, contrasting with its regional counterparts’ performance. This week’s start is marked by local inflation figures and the Banco de México’s (Banxico) decision.
The exchange rate concluded the day at 18.9069 pesos per dollar, a decrease of 1.83 centavos or 0.10% from Friday’s 18.8886 pesos, according to official data from Banxico.
The dollar’s movement ranged from a high of 18.9534 pesos to a low of 18.7666 pesos. The DXY, or Intercontinental Exchange’s Dollar Index, which compares the US dollar to a basket of six currencies, fell 0.40% to 98.74 units.
Local Factors Influencing the Peso
On the local front, consumer confidence figures reached a two-month high, and expectations of Banxico moderating its rate adjustment pace in its upcoming Thursday announcement supported the peso, keeping it nearly stable.
“The peso’s behavior will be influenced by local inflation reports and the Banxico decision, as well as global trade tensions ahead of the US imposing tariffs on several countries this Thursday,” said Monex Grupo Financiero.
Juan Carlos Cruz Tapia, a financial consultant, emphasized that apart from Banxico’s decision—expected to cut rates by 25 basis points—global trade headlines and the US Federal Reserve’s stance will be crucial. He projected a peso range of 18.75 to 19 per dollar.
Expectations Regarding the Federal Reserve
The market remains vigilant regarding information related to the Federal Reserve (Fed) due to renewed bets on a September interest rate cut, gaining more support after last Friday’s disappointing non-farm payroll report.
According to CME Group’s FedWatch tool, which tracks futures of federal funds, market bets suggest the central bank will reduce its reference rate by 25 basis points with over 93% probability.
Key Questions and Answers
- What is the current state of the Mexican peso against the US dollar? The Mexican peso experienced a slight decline against the US dollar on Monday, with the exchange rate concluding at 18.9069 pesos per dollar.
- What factors are influencing the peso this week? Local inflation figures, expectations of Banxico moderating its rate adjustments, and global trade tensions are key factors affecting the peso this week.
- What is the expected decision from Banxico? Financial consultant Juan Carlos Cruz Tapia expects a 25 basis points rate cut from Banxico.
- What are market expectations for the Federal Reserve’s interest rate? Market bets, as tracked by CME Group’s FedWatch tool, indicate a more than 93% probability of the Federal Reserve reducing its reference rate by 25 basis points in September.
