Quick overview

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The U.S. dollar weakened following remarks from Federal Reserve Vice Chair for Supervision Michelle Bowman, who said the central bank should soon consider cutting interest rates.

The Mexican peso reversed early losses and closed the first session of the week in positive territory. The local currency advanced as the dollar weakened, in a market closely watching developments in the Israel-Iran conflict and signals from the Federal Reserve (Fed).

The exchange rate ended the day at 19.1453 pesos per dollar. Compared to Friday’s official closing of 19.1683 pesos, according to data from Mexico’s central bank (Banxico), this represented a gain of 2.30 centavos, or 0.12%.

The dollar traded within a range of 19.3347 to 19.1188 pesos. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, dropped 0.33% to 98.38 points.

Is a Fed Rate Cut on the Horizon?

The dollar opened the session strong, supported by global demand for safe-haven assets amid growing geopolitical risks. However, it later lost ground after comments from Fed official Michelle Bowman suggested the central bank should begin considering rate cuts—a sharp contrast to Fed Chair Jerome Powell’s statement last week, in which he held rates steady and said there was “no rush” to ease policy.

Caution Following U.S. Strike on Iran

Investor sentiment remained cautious after a U.S. strike on Iranian nuclear facilities over the weekend. During the session, reports surfaced that Iran had launched missiles at U.S. bases in Qatar, though they were intercepted. This briefly pushed the dollar to 19.33 pesos.

The peso-dollar pair traded in a wide but relatively measured range between 19.12 and 19.34, considering the underlying geopolitical risks. Markets continue to assess the potential fallout from U.S. military action and Iran’s response.

Eyes on Banxico’s Next Move

Local traders are also bracing for Banxico’s upcoming monetary policy announcement this Thursday. The market broadly expects the central bank to deliver another aggressive rate cut of 50 basis points, bringing the key interest rate down to 8.00%.

Meanwhile, Mexico’s statistics agency (INEGI) is set to release mid-month inflation data tomorrow. The figures may reinforce expectations that Banxico will continue lowering rates in response to easing inflation pressures and a slowing economy.