Mexican Peso Jumps as the U.S. Dollar Weakens, Closes at 18.38 per Dollar
Meanwhile, the U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, fell 0.44% to 99.76 points.
Quick overview
- The Mexican peso strengthened against the U.S. dollar, closing at 18.3832 pesos per dollar, as the dollar weakened.
- Market expectations are building for a Federal Reserve interest rate cut in December, with an 84.9% probability priced in.
- U.S. economic indicators showed mixed results, with retail sales rising less than expected and consumer confidence weakening.
- Despite slightly higher inflation, Banxico is still anticipated to cut rates in December.
The peso strengthened thanks to a weaker U.S. dollar, in a market increasingly betting that the Federal Reserve will cut interest rates in December.
The Mexican currency posted gains against the dollar on Tuesday, supported by this decline in the greenback as expectations of a Fed rate cut continued to build.
The exchange rate closed the session at 18.3832 pesos per dollar. Compared to yesterday’s closing level of 18.5133, according to official data from Banco de México (Banxico), this move represented a gain of 13.01 centavos, or 0.70%, for the peso.
Trading-Day Action
During the day, the dollar traded within a range between a high of 18.5307 and a low of 18.3732 pesos. Meanwhile, the U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, fell 0.44% to 99.76 points.
In the United States, several economic indicators were released after being delayed by the prolonged 43-day government shutdown. Retail sales rose less than expected; the Producer Price Index (PPI) increased in line with forecasts; and consumer confidence weakened in November.
Expectations of Interest Rates
These figures kept expectations intact that the Fed will reduce its key interest rate for the third consecutive meeting in December. Christopher Waller, a member of the Federal Reserve Board, joined other officials on Monday in expressing support for another potential rate cut.
According to CME’s FedWatch tool, which tracks futures tied to the federal funds rate, markets are pricing in an 84.9% probability of a 25-basis-point cut in December. Beyond that meeting, visibility becomes more limited, and policymakers are expected to rely heavily on incoming data.
On the domestic front, after inflation came in slightly above expectations—but not enough to shift the outlook that Banxico will likely cut rates in December—INEGI reported that retail sales were unchanged in September, rising 3.3% on an annual basis.
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