Background on Mary Daly and the Fed’s Stance
Mary Daly, the president of the Federal Reserve Bank of San Francisco, indicated on Monday that with growing evidence of a weakening U.S. labor market and the absence of inflationary pressure from tariffs, the time for a rate reduction is approaching.
Her comments came after weak non-farm payroll data on Friday gave the market reasons to anticipate an initial rate adjustment. According to the FedWatch tool from CME Group, a September rate cut is now 90% likely.
Impact on the Mexican Peso
The Mexican peso appreciated against the U.S. dollar on Tuesday’s trading, supported by expectations of a Fed rate cut in mid-September.
The local currency regained ground, trading at 18.7378 pesos per dollar compared to Monday’s closing rate of 18.9069, representing a gain of 16.91 centavos or 0.89% according to official data from Banco de México (Banxico).
The Dollar Index, which compares the U.S. dollar to six other currencies, remained stable at 98.75 points.
Domestic Factors
In local news, business investment in Mexico increased by 0.9% in May compared to April, according to Inegi. However, fixed capital formation decreased by 7.1% in May compared to the same period last year.
Positive Trade Balance Indicators
Gabriela Siller, director of Analysis at Banco Base, suggested that another factor contributing to the peso’s appreciation could be the U.S. trade balance statistics released on Tuesday, which show positive signals for Mexico despite Donald Trump’s protectionist trade policies.
The report highlights that Mexico remains the U.S.’s leading trading partner, accounting for 15.2% of total trade in the first half of the year.
Furthermore, Trump has allowed Mexico to export more computing equipment to the U.S., despite low compliance in the T-MEC sector. Siller noted that computing equipment has become a new star in bilateral trade.
The steel industry is the most affected by protectionist policies due to high tariffs. It has experienced an annual decline of 20% by June and is estimated to drop by 25% for the year.
Key Questions and Answers
- Q: Who is Mary Daly, and why is her opinion relevant?
A: Mary Daly is the president of the Federal Reserve Bank of San Francisco. Her opinion on the U.S. economy and monetary policy is relevant because it influences market expectations regarding interest rate adjustments by the Federal Reserve.
- Q: What factors are supporting the Mexican peso’s appreciation?
A: The Mexican peso is gaining strength due to expectations of a Fed rate cut in September and positive signals from the U.S. trade balance statistics, which indicate a continued strong trading relationship between Mexico and the U.S.
- Q: How has the Mexican economy performed in terms of investment?
A: Business investments in Mexico increased by 0.9% in May compared to April, but fixed capital formation decreased by 7.1% year-over-year.
- Q: Which industries are most affected by protectionist trade policies?
A: The steel industry is the most affected by protectionist policies due to high tariffs, experiencing an annual decline of 20% through June.
