Trade Optimism and Trump’s Trade Threats Drive Dollar Strength
The Mexican peso weakened against the US dollar on Wednesday, as trade optimism propelled the greenback higher. Investors were also digesting the contents of the latest policy meeting minutes from the Federal Reserve (Fed).
The exchange rate ended the day at 19.4145 pesos per dollar, down from Tuesday’s level of 19.2683 pesos, according to official data from Mexico’s central bank, Banco de México (Banxico). This represented a loss of 14.62 centavos or 0.76% for the peso.
The dollar’s price moved between a high of 19.4254 pesos and a low of 19.2591 pesos. The Intercontinental Exchange’s Dollar Index (DXY), which compares the US currency to six key currencies, rose 0.29% to 99.89 units.
Trade Optimism and Trump’s Trade Threats
The dollar continued to gain ground, driven by trade optimism following US President Donald Trump’s decision to postpone his 50% tariff threats against the European Union in anticipation of new negotiations.
Meanwhile, traders were analyzing the minutes from the Federal Reserve’s most recent meeting. The central bank acknowledged potential increases in inflation and unemployment, a viewpoint reinforced by projections of higher recession risks.
“The main catalyst was the minutes, although it’s worth noting that they were released before the decrease in tensions between the US and China, so the narrative mentions greater risks than the current ones,” said Juan Carlos Cruz, a financial consultant.
Banxico Lowers Growth Expectations
On the domestic front, Banco de México again lowered its growth expectation for Mexico’s national economy to 0.1% in 2025 from 0.6% previously, and cut its 2026 expectation in half, warning that the economic outlook remains weak.
Tomorrow, traders will look forward to the release of Banxico’s meeting minutes, where the authority announced a 50 basis points cut to 8.50% and hinted at the possibility of further adjustments of similar magnitude in upcoming decisions.
Key Questions and Answers
- What caused the Mexican peso to weaken against the US dollar? The peso weakened due to trade optimism driving the dollar higher and investors processing the Fed’s policy meeting minutes.
- Why did the US dollar gain strength? The dollar strengthened as trade optimism increased following President Trump’s postponement of tariff threats against the European Union, anticipating new negotiations.
- What did the Fed’s minutes reveal about inflation and unemployment? The Fed acknowledged potential increases in inflation and unemployment, with projections of higher recession risks.
- How did Banco de México adjust its growth expectations for the Mexican economy? Banco de México lowered its growth expectation for the Mexican economy to 0.1% in 2025 from 0.6%, and cut its 2026 expectation in half, citing a weak economic outlook.
