Mexican Peso Strengthens Against the Dollar Ahead of Crucial U.S. Inflation Report

The market reacted to positive U.S. producer price data ahead of tomorrow’s key consumer inflation report.

The Mexican peso appreciated against the dollar on Tuesday, recovering ground and resuming its positive trend in a market that responded to favorable U.S. producer price data, released ahead of the upcoming consumer inflation report.

The exchange rate closed the day at 19.0017 pesos per dollar. Compared to Monday’s rate of 19.0844, based on data from the Bank of Mexico (Banxico), this represents a gain of 8.27 centavos, or 0.43%.

The dollar’s price fluctuated within a broad range, reaching a high of 19.1020 pesos and a low of 18.9095. The U.S. Dollar Index (DXY), which measures the greenback against six major currencies, fell by 0.54%, settling at 102.58 points.

The Producer Price Index (PPI) for final demand rose 0.1% last month, following an unrevised 0.2% increase in June. Economists polled by Reuters had forecast a 0.2% rise, and this figure boosted market sentiment.

Traders believe that easing inflationary pressures could persuade the Federal Reserve (Fed) to adopt a more dovish monetary stance and cut interest rates in September, helping alleviate recession fears.

“Today’s price report indicates that the disinflationary process remains on track, partly easing investors’ concerns about a sharp slowdown in the U.S. economy,” analysts observed. The peso is showing signs of recovery after U.S. price data pointed to a slowdown in inflation. Volatility favored the peso due to speculation surrounding the dollar.

Market participants are now eagerly awaiting tomorrow’s crucial U.S. Consumer Price Index (CPI) data, which could provide further clues to a market that sees a 100% probability of a rate cut in September, according to FedWatch, with only the magnitude in question.