Mexican Peso Gains Ground After U.S. Inflation Data

U.S. inflation slowed its pace last month, boosting expectations that the Federal Reserve (Fed) will cut interest rates in September.

The Mexican peso appreciated on Wednesday morning, following the news that inflation in the United States moderated, fueling hopes that the Fed will lower rates in September.

The spot exchange rate stood at 18.8971 pesos per dollar. Compared to yesterday’s official close of 19.0017, as reported by the Bank of Mexico (Banxico), this represents an improvement of 10.46 centavos, equivalent to a 0.55% gain.

The dollar is trading in an open range, with a high of 19.0275 pesos and a low of 18.8130. The U.S. Dollar Index (DXY), which compares the greenback against six major currencies, was down 0.15%, at 102.40 points.

The U.S. Consumer Price Index (CPI) rose by 0.2% in July, as expected, following a 0.1% decline the previous month. This brings the annual rate to 2.9%, lower than the anticipated 3.0% and down from the previous 3.0%.

The consumer price data followed a report showing producer prices had increased less than expected. The market now sees a 100% probability of a Fed rate cut in September, according to the FedWatch Tool.

Atlanta Fed President Raphael Bostic highlighted yesterday that recent economic data gives him confidence that inflation could return to the 2% target, but he wants to see more evidence before supporting a rate cut.