Mexico’s Peso Bounces Back, Can’t Escape Weekly Slump
According to CME Group’s FedWatch tool, futures markets are fully pricing in a 25-basis-point cut in October, with a 94.6% probability.
Quick overview
- The Mexican peso strengthened slightly against the dollar, closing at 18.3935 per dollar due to broad weakness in the greenback.
- Traders are anticipating two additional Federal Reserve rate cuts this year, with a high probability for cuts in October and December.
- Despite the peso's recent gains, it ended the week with a moderate loss compared to last Friday's close.
- Mexican equities declined on Friday, with the benchmark S&P/BMV IPC falling 0.38%, but remains up over 25% year-to-date.
The Mexican peso strengthened slightly against the dollar in the last session of the week, supported by broad weakness in the greenback as traders bet on two additional Federal Reserve rate cuts this year.
The exchange rate closed at 18.3935 per dollar, compared with 18.4252 yesterday, according to official data from Banco de México (Banxico). That meant a gain of 3.17 centavos for the peso, equivalent to 0.17%. During the day, the dollar traded in a range between a high of 18.4377 and a low of 18.3674.
The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, slipped 0.18% to 97.72. The federal government shutdown in the United States, caused by a budget impasse between Republicans and Democrats, delayed the release of key nonfarm payrolls data. However, traders continued to position for more monetary easing from the Fed.
According to CME Group’s FedWatch tool, futures markets are fully pricing in a 25-basis-point cut in October, with a 94.6% probability, and another cut of the same size in December, with an 85.1% probability. The peso remains supported by its carry-trade appeal and a global environment where the dollar has lost momentum, though investors remain alert to U.S. labor data, which could face further delays due to the government shutdown.
On a weekly basis, however, the Mexican currency ended with a moderate loss. Compared with last Friday’s close of 18.3602 per dollar, the peso shed 3.33 centavos, equivalent to 0.18%.
Mexican Stock Market
Equities in Mexico ended Friday’s session in the red, with losses accumulating over the week. Shares of Orbia and Pinfra led declines.
The benchmark S&P/BMV IPC, which tracks the most traded Mexican stocks, fell 0.38% to 61,984.43 points, bringing its weekly loss to 0.52%. The FTSE BIVA, from the Bolsa Institucional de Valores (Biva), slipped 0.23% to 1,240.77. Despite the setback, Mexico’s main stock index remains up more than 25% so far this year.
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