Mexican Peso Weakens Amid Interest Rate Cut Expectations
After gaining ground earlier in the day, supported by local inflation data, the Mexican peso retreated amid speculation of interest rate cuts.
On Monday, the USD/MXN depreciated slightly against the U.S. dollar, closing the session at 20.2004 pesos per dollar. Compared to Friday’s rate of 20.1793 pesos, based on official data from Banco de México (Banxico), this represents a loss of 2.11 cents or 0.11%.
During the trading session, the exchange rate fluctuated between a high of 20.2160 and a low of 20.1106 pesos per dollar. Meanwhile, the U.S. Dollar Index (DXY), which measures the dollar against a basket of six major currencies, rose 0.12% to 106.18 points.
Mexican Peso Performance Drivers
Mexico’s National Consumer Price Index (INPC) increased by 0.44% last month, according to data from the National Institute of Statistics and Geography (INEGI), bringing the annual inflation rate to 4.55%. Core inflation, which excludes volatile price items, was recorded at 0.05%.
Given the continued downward trajectory of core inflation, investors can anticipate that Banxico’s Board of Governors will reduce the benchmark interest rate by 25 basis points in this month’s decision.
Banxico is set to announce its December policy decision this Thursday, a day after the Federal Reserve (Fed) releases its own policy update. Investors are widely expecting a 25-basis-point cut in Mexico, while attention in the U.S. remains focused on Wednesday’s inflation data release.
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