Mexican Peso Falls After Comments from the Federal Reserve Chair
As expected by analysts, the Federal Reserve on Wednesday lowered its benchmark rate by 25 basis points for the second consecutive meeting.
Quick overview
- Jerome Powell indicated that a third rate cut in December is uncertain following a 25-basis-point reduction by the Federal Reserve.
- The Mexican peso weakened slightly against the U.S. dollar, closing at 18.4706 pesos per dollar after Powell's comments.
- The Federal Reserve's rate cut brought the benchmark rate to a range of 3.75%–4%, with a 10–2 vote in favor.
- Market focus is shifting to an upcoming meeting between U.S. President Trump and Chinese President Xi Jinping regarding trade tensions.
After a widely expected 25-basis-point rate cut in the U.S., Jerome Powell said that another adjustment in December is “not guaranteed.”
The Mexican peso weakened slightly against the U.S. dollar on Wednesday, despite the rate cut by the Federal Reserve. The local currency slipped after Powell signaled that a third consecutive cut later this year is uncertain.
The exchange rate closed at 18.4706 pesos per dollar, compared with 18.4315 in the previous session, according to official data from Banco de México (Banxico). The movement represented a 0.21% depreciation, or 3.91 centavos.
Throughout the day, the dollar traded between a high of 18.5025 and a low of 18.3962 pesos. The U.S. Dollar Index (DXY)—which measures the greenback against six major currencies—rose 0.47% to 99.20 at the close.
Federal Reserve Policy
As expected by analysts, the Federal Reserve on Wednesday lowered its benchmark rate by 25 basis points for the second consecutive meeting, bringing it to a 3.75%–4% range. The Federal Open Market Committee (FOMC) voted 10–2 in favor of the move.
The Fed said that downside risks to employment in the U.S. have increased, that economic activity continues to expand at a moderate pace, and that inflation has inched up slightly compared with previous levels.
In his remarks, Powell acknowledged that the current environment complicates decision-making within the Fed, noting that officials are struggling to reach a consensus on the path ahead. He also cautioned that markets should not assume another cut is coming.
Following the rate decision—which included two dissenting votes—and Powell’s press conference, traders sought clues about the Fed’s next moves, putting pressure on the peso, which tested the 18.50 resistance level.
Technical Outlook and Market Projections
From a technical standpoint, narrowing Bollinger Bands suggest potential trend changes if major catalysts emerge. The key trading range is now seen between 18.30 and 18.60 pesos, roughly 10 centavos wider than in recent days.
Market attention now turns to a highly anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping, where investors hope the two leaders will reach a truce in their ongoing trade tensions.
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