Overview of the Mexican Peso’s Decline
The Mexican peso has weakened against the US dollar on Tuesday, reaching its lowest level in two months. This decline is attributed to reduced expectations for a third consecutive interest rate cut by the Federal Reserve (Fed) in December.
Current Exchange Rate
The spot exchange rate is currently at 18.6131 pesos per dollar, marking a decrease of 12.84 centavos or 0.70% compared to yesterday’s closing rate of 18.4847 pesos, according to official data from Banco de México (Banxico). The dollar’s range is between 18.6681 pesos (the highest since September 11) and 18.4799 pesos (the lowest).
Uncertainty Surrounding the Fed
The dollar has strengthened against most developed currencies, particularly the British pound, which anticipates the Bank of England’s interest rate decision. The dollar’s rise coincides with growing uncertainty about the Fed’s December rate decision.
Fed officials remain divided on economic conditions, risks, and appropriate responses. This division may intensify before the December meeting due to the partial US government shutdown, which has halted official data releases.
According to the CME’s FedWatch tool, which tracks futures trading on the federal funds rate, market participants anticipate a 71.10% probability of a December rate cut. This remains the dominant bet.
“We expect upward pressure to persist, surpassing the 100-day moving average of 18.61, which will further weaken the peso,” stated Banorte in a note, identifying 18.75 as the key resistance level. Following the breakout, 18.50 is now the new pivotal support level on the downside.
Anticipation of Banxico’s Announcement
In local developments, traders are preparing for the Banco de México’s monetary policy decision on Thursday. Market expectations widely suggest that the bank will continue lowering credit costs and signal readiness for another reduction at the upcoming meeting.
Key Questions and Answers
- What is causing the Mexican peso to weaken against the US dollar? The primary reason is reduced expectations for a third consecutive interest rate cut by the Federal Reserve in December.
- What is the current exchange rate between the Mexican peso and the US dollar? The spot exchange rate is at 18.6131 pesos per dollar, with the dollar’s range between 18.6681 and 18.4799 pesos.
- Why is there uncertainty surrounding the Federal Reserve’s December rate decision? Fed officials have differing opinions on economic conditions, risks, and appropriate responses. This division may intensify before the December meeting due to the partial US government shutdown, which has halted official data releases.
- What are market expectations for the Banco de México’s monetary policy decision? Market participants widely expect the bank to continue lowering credit costs and signal readiness for another reduction at the upcoming meeting.
