Ceasefire Between Israel and Iran Boosts Mexican Peso
The Mexican peso gained against the dollar in Tuesday’s trading, advancing in a relieved market following US President Donald Trump‘s announcement of a ceasefire in the conflict between Iran and Israel after 12 days of hostilities.
The exchange rate ended the day at 18.9930 units per dollar, compared to 19.1453 pesos the previous day, according to official data from Banco de México (Banxico). This movement represented a gain of 15.23 centavos or 0.80 percent for the currency.
The dollar price moved within a range from a high of 19.0927 units to a low of 18.9828. The Dollar Index (DXY) from the Intercontinental Exchange, which compares the US dollar to a basket of six currencies, rose 0.43% to 97.97 points.
“We expect the recovery trend to continue; breaking through the psychological level of 19 units will send a more favorable signal. The support level to be tested is at 18.94 pesos, while resistance is located at 19.13,” stated Análisis Banorte in a note.
Focus Remains on Middle East
Donald Trump announced a ceasefire between Israel and Iran on Monday, easing concerns about an extended conflict that would also involve the US. According to a Monex report, the dollar’s fall in a lower-risk environment boosted the Mexican currency.
“Financial markets reacted positively to the cessation of hostilities, although doubts arise about compliance,” said CIBanco. “Operators remain vigilant for possible new tensions amid cross accusations of violating the truce,” they added.
Fed Chair Powell’s Testimony
Investors also followed on Tuesday the first half of Fed Chair Jerome Powell‘s testimony before Congress, which occurs every six months. Powell reiterated the need for more time to determine the impact of tariffs.
Although the Fed kept interest rates unchanged last week, the market is now speculating about a potential cut at the July meeting. Some officials from the central bank have shown support for beginning interest rate reductions soon.
Anticipation of Banxico’s Announcement
On the local front, Tuesday’s session was marked by an inflation data showing a rise, though not enough to alter expectations of a rate cut this week. The weekly inflation increased to 4.51% annually from 4.62% in the latter half of May.
Banxico will announce its monetary policy decision on Thursday, with broad expectations of a 50 basis points cut to the reference rate, taking it to 8%. The central bank has implemented similar-sized reductions in its previous two announcements.
Key Questions and Answers
- Q: What factors contributed to the Mexican peso’s gain against the dollar?
- Q: How did the Fed’s stance influence the currency market?
- Q: What is the expected outcome of Banxico’s upcoming policy decision?
A: The Mexican peso gained due to a ceasefire announcement between Israel and Iran, which eased market tensions, as well as a falling US dollar in a lower-risk environment.
A: Although the Fed kept interest rates unchanged last week, investors began speculating about a potential cut at the July meeting due to some officials’ support for reducing rates soon.
A: Market expectations are for a 50 basis points cut to the reference rate, taking it to 8%, following Banxico’s previous reductions of the same magnitude.
