Trade Agreement Between the US and UK Boosts Optimism for Progress in China Trade Negotiations
The Mexican peso appreciated against the US dollar on Thursday as traders became more optimistic following the announcement of a trade agreement between the United States and the United Kingdom. This development fueled hopes for progress in US trade negotiations with China.
Market Performance
The exchange rate ended the day at 19.5373 pesos per dollar, up from a previous record of 19.6050 pesos, according to official data from Mexico’s central bank, Banxico. This represented a gain of 6.77 centavos, or 0.35%, for the peso.
The dollar’s price fluctuated between a high of 19.6233 pesos and a low of 19.5127 pesos. The Intercontinental Exchange’s Dollar Index (DXY), which compares the US currency to six reference currencies, increased by 0.71% to 100.62 points.
Anticipation of Dialogue with China
US President Donald Trump and UK Prime Minister Keir Starmer announced a “great trade agreement” on Thursday, marking the first deal since Trump initially imposed heavy tariffs on imports, which he later suspended. This news bolstered expectations for progress in resolving US trade disputes with China.
A team of Washington officials will meet with Chinese negotiators in Geneva, Switzerland, over the weekend to discuss tariffs.
Banxico and Interest Rates
On the domestic front, the National Institute of Statistics and Geography (INEGI) reported that Mexico’s general inflation accelerated slightly to 3.93% annually, remaining within Banxico’s target range. Analysts continue to anticipate further reductions in the key interest rate.
“Despite the inflation uptick in April, we maintain the expectation of a 50-basis-point rate cut at the upcoming meeting on May 15. However, it will be crucial to observe if the governing board alters its statement given recent inflation resistance,” said Invex.
Key Questions and Answers
- What led to the Mexican peso’s appreciation against the US dollar? The optimism surrounding a trade agreement between the United States and the United Kingdom boosted hopes for progress in US-China trade negotiations, encouraging traders to buy the Mexican peso.
- What is the trade agreement announced by the US and UK? The agreement, announced by President Donald Trump and UK Prime Minister Keir Starmer, is the first deal since Trump initially imposed heavy tariffs on imports, which he later suspended.
- How did the Mexican peso perform against other currencies? The Mexican peso gained 0.35% against the US dollar, ending the day at 19.5373 pesos per dollar.
- What are analysts’ expectations regarding Banxico’s interest rates? Analysts anticipate further reductions in the key interest rate, with a 50-basis-point cut expected at the upcoming meeting on May 15.
