Mexican Peso Weakens Against the Dollar After Hitting Its Two Week-High
U.S. Commerce Secretary Scott Bessent said it was very likely the Fed would begin an aggressive rate-cutting cycle, including a 50 bps cut.
Quick overview
- The Mexican peso declined slightly to 18.6402 pesos per dollar after reaching a two-week high, influenced by dollar weakness.
- The peso lost 0.32% during the session, with the dollar trading between 18.6651 and 18.5110 pesos.
- Traders are anticipating the U.S. Producer Price Index and jobless claims data, which could impact expectations for Federal Reserve rate cuts.
- Comments from U.S. Commerce Secretary Scott Bessent suggested a likely aggressive rate-cutting cycle from the Fed, with a high probability of a 25-basis-point cut in September.
The Mexican peso slipped slightly on Wednesday after touching its strongest level in two weeks, supported earlier by dollar weakness amid bets on a U.S. interest rate cut.
The exchange rate closed the session at 18.6402 pesos per dollar, compared with Tuesday’s official close of 18.5803 pesos, according to data from the Bank of Mexico (Banxico). This represents a loss of 5.99 centavos for the peso, or 0.32%.
During the day, the dollar traded in a range between a high of 18.6651 pesos and a low of 18.5110 pesos. The U.S. Dollar Index (DXY), which measures the greenback against six major currencies, was down 0.28% at 97.80.
Markets Await U.S. Jobs and Inflation Data
Traders are now awaiting Thursday’s release of the U.S. Producer Price Index. Consumer price figures published Tuesday had strengthened expectations for a Federal Reserve (Fed) rate cut, weighing on the dollar.
Also due tomorrow are weekly jobless claims data. The latest U.S. nonfarm payrolls report showed signs of a weakening labor market, further fueling bets on rate cuts.
Talk of a 50-Basis-Point Cut
Markets also reacted positively today to comments from U.S. Commerce Secretary Scott Bessent, who said it was very likely the Fed would begin an aggressive rate-cutting cycle, including an initial 50-basis-point move.
Following Bessent’s remarks, traders indicated that the Fed should cut by 50 basis points at its September 17 meeting and ultimately lower rates by 150 to 175 basis points.
According to CME’s FedWatch tool, which tracks rate futures to gauge market expectations, there is a 93.8% probability of a 25-basis-point cut in September, and a 6.2% probability of a 50-basis-point cut.
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