Mexican Peso Rises on Weaker Dollar, Ends Week Higher
Against last Friday’s closing level of 18.7412 pesos per dollar, the currency gained 14.77 centavos, equivalent to 0.79%.
Quick overview
- Jerome Powell's speech increased expectations for a potential interest rate cut in the U.S. in September.
- The Mexican peso strengthened against the dollar, closing at 18.5935 pesos per dollar, a gain of 0.92%.
- The U.S. Dollar Index fell by 0.93% following Powell's remarks, which highlighted risks in the labor market and inflation.
- Market attention is now focused on upcoming U.S. GDP and inflation data that could influence future policy decisions.
Federal Reserve Chair Jerome Powell’s speech strengthened bets on an interest rate cut in the United States in September. The Mexican peso appreciated against the dollar in Friday’s trading.
The local currency advanced on the back of a weaker greenback, after the highly anticipated speech by the Fed chair at Jackson Hole reinforced expectations of a rate cut.
The exchange rate closed at 18.5935 pesos per dollar. Compared with Thursday’s official closing level of 18.7668 pesos, according to Bank of Mexico (Banxico) data, the move represented a gain of 17.33 centavos, or 0.92%.
The dollar traded in a range between a high of 18.7772 pesos and a low of 18.5711. The U.S. Dollar Index (DXY), from Intercontinental Exchange, which measures the dollar against a basket of six major currencies, fell 0.93% to 97.74 points.
Jerome Powell and the Federal Reserve
On Friday, Jerome Powell signaled a possible rate cut in September but stopped short of a firm commitment. He acknowledged rising risks for the labor market, while noting that inflation risks persist.
“The stability of the unemployment rate, among other indicators, allows us to proceed cautiously. However, with monetary policy in restrictive territory, benchmark prospects and the shifting balance of risks could justify a cut,” Powell said.
In reaction to Powell’s remarks, CME Group’s FedWatch tool, which tracks rate expectations via federal funds futures, raised the probability of a 25-basis-point cut in September to 89.3%.
Attention now turns to next week’s U.S. GDP and inflation data, which will test Powell’s assessment. Any slowdown would intensify calls for policy adjustments.
Market Projections
On the local front, data released this morning showed that Mexico’s headline inflation rose much less than expected in the first half of August. Meanwhile, GDP growth in the second quarter came in below the initial estimate.
On a weekly comparison, the peso also appreciated, buoyed by weakness in its U.S. counterpart. Against last Friday’s closing level of 18.7412 pesos per dollar, the currency gained 14.77 centavos, equivalent to 0.79%.
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