Overview of the Mexican Peso’s Recent Gains
The Mexican peso has been gaining ground against the US dollar for four consecutive trading sessions on Monday. This advance comes as the greenback continues to weaken broadly, and following news that Mexico’s inflation rate accelerated in the previous month.
Current Exchange Rate and Dollar Movement
The spot exchange rate currently stands at 19.0608 pesos per dollar, marking a 4.46-centavo (or 0.23%) increase compared to Friday’s closing rate of 19.1054 pesos per dollar, according to data from Mexico’s central bank (Banxico). The dollar has been fluctuating between a high of 19.1082 pesos and a low of 19.0486 pesos.
Meanwhile, the Dollar Index (DXY) from the Intercontinental Exchange, which compares the US currency to a basket of six currencies, fell by 0.11% to 99.08 points.
Inflation in Mexico Accelerates
Mexico’s consumer price inflation rose to 4.42% in May, surpassing the official target of 3% ±1 percentage point. This is the highest level since November and exceeds expectations.
The underlying inflation, which excludes volatile food and energy prices, also increased more than anticipated to 4.06% annually. Within this category, the inflation of goods accelerated while services decelerated.
“May’s figures are disappointing as they surpassed expectations and showed an acceleration. A significant portion of this impact came from the non-core group. It is expected that this shock will dissipate, and the outlook for interest rates will continue its downward trend,” said Vector Análisis.
Banxico’s Monetary Policy Response
In May, Banxico reduced its benchmark interest rate by 50 basis points for the third consecutive time, placing it at 8.5%, its lowest level since 2022. In the accompanying statement, the central bank indicated that it anticipated an environment conducive to further adjustments of a similar magnitude.
Key Questions and Answers
- What is driving the Mexican peso’s recent gains against the US dollar? The peso has been strengthening due to a broadly weakening US dollar and news that Mexico’s inflation rate accelerated in the previous month.
- What is the current exchange rate and how has it changed recently? The spot exchange rate is currently at 19.0608 pesos per dollar, representing a 0.23% increase from Friday’s closing rate of 19.1054 pesos per dollar.
- What is the recent inflation situation in Mexico? Mexico’s consumer price inflation rose to 4.42% in May, surpassing the official target of 3% ±1 percentage point. Underlying inflation also increased more than expected to 4.06% annually.
- How has Banxico responded to the recent inflation data? Banxico reduced its benchmark interest rate by 50 basis points in May for the third consecutive time, placing it at 8.5%. The central bank expects an environment that will allow for further adjustments of a similar magnitude.
