Overview of the Mexican Peso’s Performance
The Mexican peso reversed its initial losses and closed the first trading day of the week on positive ground. The local currency advanced against the weakening US dollar, as markets remained attentive to the conflict between Israel and Iran, along with comments from the Federal Reserve (Fed).
The exchange rate ended the day at 19.1453 pesos per dollar. Compared to Friday’s close of 19.1683 pesos, according to official data from Banco de México (Banxico), this represented a gain of 2.30 centavos, or 0.12%, for the Mexican peso.
The dollar’s price moved within a range between a high of 19.3347 pesos and a low of 19.1188 pesos. The Intercontinental Exchange’s Dollar Index (DXY), which compares the US currency to a basket of six currencies, fell 0.33% to 98.38 units.
Potential Interest Rate Cut by the Fed
The dollar started the session strong due to global demand for safe-haven assets amid rising concerns over geopolitical issues. Later, it weakened in response to comments from Michelle Bowman, the Federal Reserve’s vice president for supervision.
Bowman stated that the central bank should soon consider cutting interest rates, contrasting with Jerome Powell’s discourse from the previous week. During that session, Powell maintained rates unchanged and mentioned no urgency for a rate cut.
Cautious Investor Sentiment Following US Attack on Iran
Investors expressed concern over a potential US attack on Iranian nuclear facilities over the weekend. During the session, news emerged that Iran had launched missiles at US bases in Qatar, though they were intercepted, causing the dollar to rise to 19.33 pesos.
“The range has been wide, from 19.12 to 19.34, but measured considering the real risk. Markets continue evaluating the possible repercussions of US attacks and Iran’s response,” explained Juan Carlos Cruz Tapia, a financial consultant.
Anticipation of Banxico’s Policy Announcement
Local operators are also preparing for Banxico’s monetary policy announcement on Thursday. Market expectations widely anticipate that the monetary authority will continue aggressively cutting the key rate, adjusting it by 50 basis points to 8.00%.
Meanwhile, the National Institute of Statistics and Geography (INEGI) will release local inflation data for the first 15 days of the month tomorrow. These figures could reinforce expectations that the central bank will extend rate cuts due to declining pressures and an economic slowdown.
Key Questions and Answers
- What is the current state of the Mexican peso against the US dollar? The Mexican peso gained strength against the weakening US dollar, closing the day at 19.1453 pesos per dollar.
- Why did the Mexican peso reverse its initial losses? The peso reversed its losses due to weakening demand for the US dollar amid global safe-haven asset demand and speculation about potential Fed interest rate cuts.
- What are investors concerned about regarding the US and Iran? Investors are worried about a possible US attack on Iranian nuclear facilities and the subsequent response from Iran.
- What is expected from Banxico’s policy announcement? Market expectations are that Banxico will continue aggressively cutting the key interest rate by 50 basis points to 8.00%.
- How might inflation data influence Banxico’s decision on interest rates? Declining inflation pressures, as indicated by the upcoming INEGI data, could support Banxico’s decision to extend rate cuts.
