Mexican Peso Rebounds After Losing Streak
Traders continue to price in another cut at the Fed’s October 29 meeting. CME Group’s FedWatch shows an 89.8% probability of another cut.
Quick overview
- The Mexican peso strengthened against the U.S. dollar, ending a three-day losing streak, closing at 18.3526 pesos per dollar.
- This appreciation was supported by a weaker dollar as investors await Banxico's rate announcement on Thursday.
- Markets are anticipating a 25 basis-point rate cut from Banxico due to sluggish economic growth and moderating inflation.
- Despite the peso's rebound, analysts suggest the trend may still lean towards depreciation in the short to medium term.
The Mexican peso strengthened against the U.S. dollar in Monday’s session, snapping a three-day losing streak. The move was supported by a weaker greenback, as investors await Banxico’s rate announcement scheduled for Thursday.
The exchange rate closed at 18.3526 pesos per dollar, compared with Friday’s official close of 18.3878, according to Banco de México (Banxico). The result represents an appreciation of 3.52 centavos, or 0.20%. During the session, the peso traded between a high of 18.4386 and a low of 18.3409. Meanwhile, the U.S. Dollar Index (DXY)—which measures the dollar against a basket of six major currencies—fell 0.33% to 97.32 points.
Fed Commentary in Focus
Markets closely monitored remarks from Federal Reserve officials questioning the need for another rate adjustment following last week’s 25 basis-point cut, which brought the federal funds rate to 4.00%-4.25%.
St. Louis Fed President Alberto Musalem and Atlanta Fed President Raphael Bostic said the recent cut was appropriate to manage rising unemployment risks, but stressed that controlling inflation remains the central bank’s top priority.
Despite their comments, traders continue to price in another cut at the Fed’s October 29 meeting. CME Group’s FedWatch tool shows an 89.8% probability of another adjustment.
Local Outlook
Domestically, attention is fixed on Banxico’s policy meeting this week. Markets broadly expect a 25 basis-point rate cut, amid sluggish economic growth and moderating inflation.
Analysts note that the 18.50 peso-per-dollar level, which recently acted as support, may now serve as resistance. Despite the peso’s rebound, the short- and medium-term trend remains tilted toward depreciation. Additional signals could come from mid-September inflation data and July’s IGAE economic activity index, due later this week.
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