Economic Data Release in the US and Anticipation of Banxico’s Monetary Policy
The Mexican peso has slightly weakened against the US dollar this Thursday morning, following the release of some economic data in the United States. Traders locally are anticipating that the Bank of Mexico (Banxico) will cut its interest rates later in the day.
Current Exchange Rate and Dollar Movement
The spot exchange rate is currently at 19.4324 pesos per dollar, marking a decrease of 4.32 centavos (0.22%) compared to the previous day’s closing rate of 19.3892 pesos, as per official data from Banxico.
The dollar’s price has been fluctuating between a high of 19.4620 pesos and a low of 19.3269 pesos. Meanwhile, the Dollar Index (DXY), tracked by the Intercontinental Exchange, has dropped 0.12% to 100.95 points when compared to a basket of six currencies.
US Economic Data and Market Expectations
In the United States, recent economic data released this morning includes a decline in the Producer Price Index (PPI) for April, indicating a slowdown, while retail sales increased. Additionally, the number of new jobless claims remained unchanged.
Local Market Anticipation of Banxico’s Monetary Policy
The local market widely expects Banxico to reduce credit costs by 0.5 percentage points, which would be its third consecutive reduction of this magnitude. Currently, Banxico’s interest rate stands at 9%.
“Investors are eagerly awaiting economic data, clues about the Federal Reserve’s monetary policy, and Banxico’s monetary policy decision, which implies a narrower interest rate differential compared to the US, anticipating a 50 basis points cut,” stated Monex in a note.
Key Questions and Answers
- What is causing the Mexican peso to weaken against the US dollar? The peso is slightly weakening due to the release of mixed economic data in the United States and anticipation of a potential interest rate cut by Banxico.
- What recent US economic data was released? The Producer Price Index (PPI) for April showed a decline, while retail sales increased. The number of new jobless claims remained unchanged.
- Why are traders expecting Banxico to cut interest rates? Traders anticipate a rate reduction by 0.5 percentage points, which would be Banxico’s third consecutive cut, narrowing the interest rate differential with the US.
