Mexican Peso Slips to 18.50 After Banxico Rate
Since early 2024, Banxico has lowered its policy rate by 375 bps from the record 11.25% peak, as domestic growth has cooled.
Quick overview
- U.S. economic data exceeded expectations, strengthening the dollar and causing the peso to weaken.
- The peso fell to 18.5052 per dollar after Mexico's central bank confirmed a 25 basis point rate cut.
- U.S. jobless claims dropped to 218,000 and GDP for Q2 was revised up to 3.8%, boosting dollar confidence.
- Banxico has cut rates by 375 basis points since early 2024, but local assets may still attract inflows.
A stronger-than-expected batch of U.S. economic data boosted the dollar Thursday, weighing on the peso, which also declined after Mexico’s central bank confirmed a widely anticipated rate cut.
The peso weakened to 18.5052 per dollar in official Bank of Mexico (Banxico) figures, compared with 18.4276 yesterday—a 0.42% daily loss, equal to 7.76 centavos. During the session, the exchange rate traded between a high of 18.5641 and a low of 18.4019. Meanwhile, the ICE Dollar Index (DXY), which tracks the greenback against six major currencies, rose 0.59% to 98.45.
Dollar Strength on U.S. Data
The dollar gained after weekly jobless claims fell to 218,000, below expectations of 235,000 and down from the prior week. U.S. GDP for Q2 was revised higher to 3.8% annualized, beating forecasts of 3.3%. Durable goods orders for August also surprised to the upside with a 2.9% gain.
The data reinforced the dollar’s firm tone, with investors recalibrating expectations for Federal Reserve policy. According to CME’s FedWatch tool, futures markets now price an 87.7% chance of a 25 bps rate cut in October, down from 92% yesterday.
Banxico Cuts Rates Again
Banxico cut its benchmark rate by 25 basis points to 7.5%, in line with analyst forecasts, citing progress on inflation. Mexico’s CPI rose 3.57% in August, while the mid-September reading accelerated slightly to 3.74%—both below the bank’s target.
Since early 2024, Banxico has lowered its policy rate by 375 bps from the record 11.25% peak, as domestic growth has cooled.
Despite the latest cut reducing the peso’s yield advantage, local assets may still draw inflows through carry trades, helping limit downside pressure on the currency.
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