Overview of the Mexican Peso’s Recent Performance
The Mexican peso has been on a downward trend for four consecutive days, weakening against the US dollar. This decline is primarily due to geopolitical uncertainties surrounding the conflict between Israel and Iran, along with concerns about the extent of US involvement in the conflict.
Market Performance
On Friday, the exchange rate ended at 19.1683 pesos per dollar, marking a decrease of 12.67 centavos (0.67%) compared to the previous day’s closing rate of 19.0416 pesos per dollar, according to data from Banco de México (Banxico). The dollar’s range during the day was from a high of 19.1918 pesos to a low of 19.0082 pesos.
Meanwhile, the Dollar Index (DXY) from the Intercontinental Exchange, which compares the US dollar to a basket of six currencies, increased by 0.03% to 98.82 units.
Geopolitical Tensions
The ongoing conflict between Israel and Iran has lasted for a week, causing market participants to grow increasingly cautious as they await concrete information from US President Donald Trump regarding potential US participation in any bombing of Iran.
Israel has been consistently attacking Iran’s nuclear facilities with missiles, aiming to prevent the construction of an atomic bomb. Meanwhile, Iran insists it has no intention of developing nuclear weapons, while Trump demands “absolute submission.”
Compared to the previous Friday’s closing rate of 18.9396 pesos per dollar, the Mexican peso has weakened by 22.87 centavos (1.21%), affected by geopolitical concerns. Vector Análisis suggests that the peso could potentially fall further to between 19.30 and 19.40 pesos per dollar.
Inflation and Monetary Policy
Another significant development this week was the monetary policy announcement from the US Federal Reserve, which kept interest rates unchanged as expected but warned of potential short-term inflationary pressures due to tariffs.
In local news, market participants are preparing for crucial inflation data and the upcoming monetary policy decision by Banxico. Market expectations widely predict that Banxico will cut its benchmark rate by 50 basis points on Thursday.
Key Questions and Answers
- What is causing the Mexican peso to weaken? The primary reasons for the peso’s decline are geopolitical uncertainties surrounding the conflict between Israel and Iran, as well as concerns about US involvement in the conflict.
- How has the US Federal Reserve influenced the Mexican peso? The Fed’s decision to keep interest rates unchanged, coupled with warnings of potential short-term inflationary pressures due to tariffs, has contributed to market volatility.
- What are market expectations for Banxico’s monetary policy decision? Market participants widely expect Banxico to reduce its benchmark rate by 50 basis points during the upcoming policy meeting.
