Mexican Peso Weakens on Stronger Dollar and Weak Domestic GDP Data
Traders continued adjusting their positions after Federal Reserve Chair Jerome Powell said markets should not assume another rate cut.
Quick overview
- The Mexican peso weakened against the dollar, closing at 18.5476 pesos per dollar, a 0.42% drop.
- Mexico's economy contracted by 0.3% in the third quarter, contributing to a less optimistic outlook.
- Traders are adjusting positions following comments from Federal Reserve Chair Jerome Powell regarding interest rates.
- Expectations for a potential rate cut in December remain, with a 74.8% probability for a 25-basis-point reduction.
The Mexican peso weakened against the dollar in Thursday’s session, pressured by a stronger greenback and data showing Mexico’s economy contracted in the third quarter, in line with expectations.
The exchange rate closed at 18.5476 pesos per dollar, compared with 18.4706 the previous day, according to official data from the Bank of Mexico (Banxico). That represents a 0.42% drop, or 7.7 centavos.
The dollar traded between a high of 18.6049 and a low of 18.4517 pesos. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.36% to 99.51 points.
Traders continued adjusting their positions after Federal Reserve Chair Jerome Powell said markets should not assume another rate cut in December — which would be the third following yesterday’s reduction.
Expectations remain mixed but lean slightly toward another move. According to CME’s FedWatch Tool, futures on the federal funds rate reflect a 74.8% probability of a 25-basis-point cut in December.
On the trade front, markets digested the results of the long-awaited meeting between U.S. President Donald Trump and Chinese President Xi Jinping in South Korea, which helped ease tensions and led to a rollback of some tariffs on Chinese goods.
Local Data and Mexico’s Growth
Domestically, Mexico’s GDP fell 0.3% in the third quarter compared with the previous three months, based on preliminary seasonally adjusted data from INEGI. On an annual basis, the economy contracted 0.2% in original terms.
These results point to a less optimistic outlook. Investors should expect the upward bias in the dollar to continue — a break above the psychological 18.50 level will likely reinforce the peso’s depreciation. In this context, the next resistance could be around 18.62.
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