Mexican Peso Falls on Trump Tariff Uncertainty
In this environment, U.S. Treasury yields advanced, with the 30-year yield hitting its highest level in more than a month.
Quick overview
- The Mexican peso depreciated against the dollar, closing at 18.7204 pesos per dollar, a loss of 0.42%.
- This decline followed a U.S. court ruling that most tariffs imposed by the Trump administration were illegal, although the tariffs remain in place for now.
- U.S. Treasury yields rose, supporting the dollar despite expectations of a potential interest rate cut by the Federal Reserve later this month.
- Investors are closely monitoring upcoming labor market reports, which could influence future monetary policy decisions.
The Mexican peso depreciated against the dollar on Tuesday in cautious trading after a U.S. federal court ruled that most tariffs imposed by former President Donald Trump were illegal.
The exchange rate closed at 18.7204 pesos per dollar, compared with Monday’s close of 18.6428, according to official data from Banco de México (Banxico). The move represented a loss of 7.76 centavos, or 0.42%, for the peso.
During the session, the dollar traded in a range between a high of 18.8631 pesos and a low of 18.6480. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.66% to 98.32.
Tariff Outlook
On Friday, an appeals court declared that most of the Trump administration’s tariffs were unlawful, a ruling that could undermine Washington’s trade pressure strategy. However, the tariffs remain in place pending further resolution.
In this environment, U.S. Treasury yields advanced, with the 30-year yield hitting its highest level in more than a month. The stronger yields supported the dollar despite expectations that the Federal Reserve will cut interest rates by 25 basis points at its meeting later this month.
According to CME Group’s FedWatch tool, markets are pricing in a 91.6% probability of a 25-basis-point cut in September and a 48.9% chance of another cut in October.
Focus on Jobs Data
Investors are now awaiting key labor market reports, which make up half of the Fed’s dual mandate. On Wednesday, attention will turn to the Job Openings and Labor Turnover Survey (JOLTS), while Friday’s nonfarm payrolls report is expected to set the tone for monetary policy into year-end.
Evidence of labor market weakness would reinforce the case for a September rate cut and leave the door open for another move before December. Conversely, a strong payrolls report could temper expectations for aggressive easing.
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