Market Sentiment Improves After Trump’s Ceasefire Announcement
The Mexican peso appreciated against the US dollar on Tuesday morning, following President Donald Trump’s announcement of a ceasefire between Israel and Iran after 12 days of tension. The spot exchange rate is currently at 18.9819 pesos per dollar, marking a 16.34-cent increase or 0.85% improvement compared to the previous official close of 19.1453 pesos by Banco de México (Banxico).
Dollar Range and DXY Index
The dollar’s price is fluctuating between a high of 19.1631 pesos and a low of 18.9485 pesos. Meanwhile, the Intercontinental Exchange’s Dollar Index (DXY) fell 0.55% to 97.85 points, comparing the US currency with six reference currencies.
Decreasing Risk Aversion
Trump’s ceasefire announcement between Israel and Iran has eased concerns about a broader conflict involving the US, positively impacting the Mexican peso. Monex stated, “The peso is driven by a weaker dollar and reduced risk aversion.”
Analysts from Banorte expect the recovery trend to continue, with the psychological support level of 19 pesos providing a more favorable signal. They noted, “The support level to be tested is 18.94, while resistance is at 19.13.”
Investors are also assessing Jerome Powell, the Federal Reserve (Fed) president’s testimony, who mentioned that the US central bank requires more time to analyze the new tariff policy’s impact on consumer prices.
Local Inflation Report
On a local level, the session was marked by an inflation report showing an uptick in the general price index during the first half of June. However, it maintained expectations that Banxico would cut its benchmark interest rate by 50 basis points this week.
Inflation slowed in the first half of June, aligning with forecasts, though it exceeded the official target range of 3% ± 1 percentage point. The National Consumer Price Index stood at 4.51% annually, down from 4.62% in the latter half of May.
Key Questions and Answers
- What caused the Mexican peso to appreciate against the US dollar? The peso gained strength due to a weaker US dollar and decreased risk aversion following Trump’s ceasefire announcement between Israel and Iran.
- How did the Federal Reserve’s stance influence the market? Fed President Jerome Powell’s comments indicating the need for more time to assess new tariff policies’ impact on consumer prices contributed to market speculation.
- What was the local inflation report’s key finding? The general price index increased during the first half of June, though it remained below the official target range of 3% ± 1 percentage point.
