The Mexican Peso has recently hit a six-day low against the US Dollar, following some comments from officials and the release of US data. The Bank of Mexico (Banxico) revealed in its September meeting minutes concerns over Mexico’s slowing economy and sticky service inflation, indicating that further rate cuts may be necessary. The USD/MXN pair is currently trading at 19.52, up 0.18%. Banxico’s minutes highlighted that all members agree on the weakening economy since Q4 2023, with consumption and investment experiencing a slowdown. Although there has been some improvement in inflation, service inflation remains a concern, leading to the possibility of more rate cuts.
In the US, the latest inflation data came in slightly higher than expected, but weaker jobs data has tempered the possibility of aggressive Federal Reserve cuts. Federal Reserve officials have been making comments on the economy, with some expressing optimism about inflation and economic growth. Chicago Fed President Austan Goolsbee stated that inflation was near estimates, while New York Fed’s John Williams believed that the economy could support additional rate cuts. Despite this, some Fed officials are considering skipping rate cuts in November, which may impact the market sentiment.
The US Dollar Index (DXY) has been performing well against other currencies, supported by the increase in US Treasury yields. The USD/MXN pair has been driven by multiple factors, including economic data releases, central bank actions, and geopolitical trends. The Mexican Peso is affected by the performance of the Mexican economy, central bank policies, foreign investment, remittances, and even oil prices. Banxico’s main objective is to maintain inflation at low levels by setting appropriate interest rates, which can impact the value of the Peso.
Macroeconomic data releases are crucial to understanding the state of the Mexican economy and its potential impact on the Peso. A strong economy with high growth, low unemployment, and confidence can attract foreign investors and lead to increased interest rates. On the other hand, weak economic data can lead to depreciation of the Peso. As an emerging-market currency, the Mexican Peso tends to perform well during risk-on periods and weakens during times of market turbulence or economic uncertainty. Overall, the movements in the USD/MXN pair are influenced by a combination of domestic and international factors affecting the Mexican economy.
