Background on Key Figures and Institutions
The Mexican peso has weakened against the US dollar on this Thursday morning, following the release of Mexico’s inflation data. Traders are preparing for a monetary policy decision by the country’s central bank, Banco de México (Banxico), later in the day.
The spot exchange rate is currently at 18.6739 pesos per dollar, compared to yesterday’s closing rate of 18.6142 pesos. This represents a decrease of 5.97 centavos, or 0.32%, for the Mexican currency.
The dollar’s movement is between a high of 18.6553 pesos and a low of 18.5904 pesos. The Dollar Index (DXY) by the Intercontinental Exchange, which compares the US dollar to six major currencies, has increased by 0.20% to reach 98.43.
Inflation Data and Its Impact
According to the National Institute of Statistics and Geography (INEGI), the general price index for consumers moderated last month to 3.51%, its lowest reading since December 2020. The underlying inflation, on the other hand, stood at 4.23%, remaining above Banxico’s target.
“The peso is declining as the dollar gains ground and after reaching the deadline for the application of US tariffs on various countries, which boosted risk-averse sentiment,” said analysts at Monex in a note.
Expected Banxico Rate Cut
Market expectations are for Banco de México to announce a rate cut later in the day, though of a smaller magnitude (25 basis points) compared to the previous half-percentage point reductions announced in four consecutive policy decisions this year.
“We anticipate a 4-to-1 vote to lower the benchmark rate to 7.75%, with a relatively neutral tone in the statement, maintaining the guidance unchanged from the previous one. We project the rate to be at 7.25% by December,” said Banamex.
Key Questions and Answers
- What is causing the Mexican peso to weaken against the US dollar? The peso is losing ground as the dollar strengthens and following the deadline for the imposition of US tariffs on various countries, which increased risk aversion among traders.
- What are the recent inflation figures in Mexico? The general price index for consumers moderated to 3.51% in the last month, while the underlying inflation stood at 4.23%, remaining above Banxico’s target.
- What is expected from the upcoming Banxico rate decision? Market participants anticipate a 25 basis point reduction in the benchmark interest rate, which would lower it to 7.75%. The statement is expected to maintain a relatively neutral tone with unchanged guidance.
