Dollar Weakens Amidst Uncertainty in the US Economy
The Mexican peso appreciated against the dollar in Friday’s trading, closing a positive week as the US currency weakened amid growing concerns about the US economy. The exchange rate ended the day at 19.2398 pesos per dollar, up 7.23 centavos or 0.37%, according to official data from Mexico’s central bank, Banxico.
The dollar’s price ranged from a high of 19.3758 pesos to a low of 19.2255 pesos, the lowest level since early October. The Dollar Index (DXY), which measures the greenback against six reference currencies, fell 0.83% to 99.10 points.
Trump’s Threats and Fiscal Plan
US President Donald Trump issued new trade threats, this time targeting the European Union. The Republican suggested imposing tariffs of up to 50% on EU goods if negotiations fail.
Ha sido muy difícil tratar con la Unión Europea, que se formó con el propósito principal de aprovecharse de Estados Unidos en el COMERCIO. Nuestras discusiones con ellos no van a ninguna parte!
— Donald J. Trump (@realDonaldTrump) November 18, 2022
Initially, the market showed volatility due to Trump’s stance, but the impact eventually focused on the dollar as investors evaluated the uncertain moment for the US economy. This helped the peso reverse its decline.
Trump’s Plan and Minutes
Last week, Moody’s downgraded the US sovereign debt rating, becoming the last of the three major agencies to do so. Moody’s cited the excessive growth in US debt as the reason for its decision.
Mid-week, the House of Representatives approved a tax cut and spending bill driven by President Trump. Analysts have warned that the plan could increase US public debt by $3 to $5 trillion.
Investors will now monitor the project’s progress in the Senate. Next week, the minutes of monetary policy from the US Federal Reserve (Fed) will be published on Wednesday, and from Mexico’s central bank, Banxico, on Thursday.
Weekly Gain
With this advance, the peso not only pushed its price to unseen levels since October but also improved its weekly performance. Compared to the previous Friday’s close of 19.4746 pesos, the Mexican peso gained 23.48 centavos or 1.21%.
Key Questions and Answers
- Q: Who is Donald Trump and why is he relevant? A: Donald Trump is the former President of the United States (2017-2021). His recent trade threats against the European Union have impacted global markets, including the Mexican peso.
- Q: What concerns are affecting the US economy? A: Concerns about the US economy include a downgrade of its sovereign debt rating by Moody’s and the potential increase in public debt due to Trump’s fiscal plan.
- Q: How did the Mexican peso perform this week? A: The Mexican peso appreciated against the dollar, gaining 1.21% in the week due to the weakening US currency and growing concerns about the US economy.
