Background on the Mexican Peso and its Recent Performance
The Mexican peso experienced a slight appreciation on Monday morning, hovering near its best levels in over a year. This development comes as investors digested a weak manufacturing activity report from the United States, setting the stage for a week marked by the Federal Reserve’s (Fed) decision.
Mexican Peso’s Current Exchange Rate
As of Monday, the Mexican peso was trading at 18.3960 against the US dollar, a level unseen since July 2024. The currency showed a marginal advance of 0.05% compared to the London Stock Exchange (LSEG) reference rate on Friday, aiming for its seventh consecutive day of gains.
Weak US Manufacturing Data and Fed Expectations
The Empire State index, a measure of manufacturing activity in the New York region compiled by the Fed, fell to 8.7 in September from August’s 11.9. Market analysts, according to a Reuters survey, had predicted the index would stand at 5.
Following these data releases, market participants maintained their expectations that the Fed would initiate interest rate cuts in its upcoming announcement on Wednesday, with a 25 basis points reduction following rates held steady at 4.25%-4.50% since late last year.
Local Market Closures for Independence Day
On a local note, financial markets will be closed on Tuesday in observance of the Mexican Independence Day holiday.
Key Questions and Answers
- What is the current exchange rate of the Mexican peso? The Mexican peso is currently trading at 18.3960 against the US dollar.
- Why is the Mexican peso appreciating? The peso is gaining ground as investors process a weak US manufacturing activity report and anticipate the Federal Reserve’s interest rate decision.
- What is the Empire State index, and why is it significant? The Empire State index measures manufacturing activity in the New York region. A decline from 11.9 in August to 8.7 in September indicates a slowdown, influencing investor sentiment.
- What are market expectations for the Federal Reserve’s decision? Market participants expect the Fed to initiate interest rate cuts, with a 25 basis points reduction following sustained rates between 4.25%-4.50% since late 2022.
- Why are local markets closed on Tuesday? Local financial markets will be shut on Tuesday to celebrate Mexico’s Independence Day.
