Background on Key Figures and Institutions
The Mexican peso experienced a slight appreciation against the US dollar on Friday, supported by a retreat in the greenback following comments from a Federal Reserve (Fed) official advocating for an interest rate cut this month. However, the peso’s gains were insufficient to offset the dollar’s overall strength during the week, fueled by inflation, employment, and retail sales data that led the market to anticipate stable interest rates.
Christopher Waller, a member of the Federal Reserve Board, announced his intention to vote for a quarter-percentage point reduction in the US reference rates during the July meeting. Gabriela Siller, Director of Analysis at Banco Base, explained that the dollar strengthened by 0.57% during the week due to the publication of US consumer inflation data, which fueled speculation that the Fed would be more cautious in cutting rates.
Inflation and Trade Policies
In June, US inflation was recorded at a monthly rate of 0.29%, slightly above the market expectation of 0.26%. At an annual rate, it stood at 2.67%, accelerating for the second consecutive month due to a low base of comparison and slightly exceeding market expectations of 2.64%.
Trade Policy Impact on Peso
Gabriela Siller highlighted another reason for the peso’s depreciation: the tightening of the US protectionist trade policy towards Mexico, which increased risk aversion.
On the morning of July 12, President Trump published a letter imposing a 30% tariff on Mexican imports, set to take effect on August 1st. “Although he did not specify, it is assumed that the 25% tariff supported by the Economic Powers in Emergency Act (IEEPA) will rise to 30%,” Siller said. She also noted that the letter did not clarify whether goods sent under the T-MEC agreement would be exempt. Despite the peso’s depreciation due to this news, the reaction was moderate, as other countries have faced higher tariffs, and existing tariffs are not being enforced strictly.
Market Performance
The Mexican peso closed at 18.7312 per dollar on Friday, up from Thursday’s closing rate of 18.7569, according to official data from Banco de México (Banxico). This represented a gain of 2.57 centavos, or 0.14%, for the session. However, the peso has lost ground over the past two weeks, declining by 8.68 centavos or 0.47% since its closing rate of 18.6444 per dollar on July 11th, while maintaining a consolidation range with the next key level at 18.60 pesos, according to Banorte.
Key Questions and Answers
- What is the current state of the Mexican peso against the US dollar? The Mexican peso experienced a slight appreciation on Friday but has weakened over the past two weeks due to overall dollar strength.
- What factors contributed to the peso’s recent performance? The peso has been influenced by US inflation data, employment figures, retail sales, and tightening trade policies between the US and Mexico.
- Who are the key figures mentioned in this article? Christopher Waller, a Federal Reserve Board member, and Gabriela Siller, Director of Analysis at Banco Base, are the key figures discussed.
- What tariff changes has President Trump announced regarding Mexico? President Trump announced a 30% tariff on Mexican imports, effective August 1st, following a 25% tariff supported by the IEEPA.
