The Mexican peso continued its upward streak against the US dollar on Thursday morning, strengthening yet again after the U.S. published encouraging inflation data that could mean a Federal Reserve rate cut is on the horizon.
According to Bloomberg data, the peso was trading at 17.73 to the U.S. dollar early on Thursday morning. By 6:40 p.m. EDT, however, Bloomberg reported that it had weakened slightly to 17.75 to the dollar.
This upward trend shows Mexico’s peso appearing to recover after the currency’s volatility in the aftermath of the June 2 presidential elections. The peso’s strengthening this week puts it at its best performance against the U.S. dollar since June 5, when it traded at 17.53.
Thursday marked the seventh consecutive day of gains against the U.S. dollar, making it the peso’s longest winning streak since mid-March.
U.S. inflation in June continues downward trend
U.S. consumer prices fell more than expected in June, according to government data published on Thursday.
Last month, the US Consumer Price Index (CPI) decreased by 0.1% after remaining unaltered in May. Over the 12 months leading up to June, the CPI increased to 3%. Economists surveyed by Reuters had anticipated a 0.1% increase and a 3.1% year-on-year rise.
According to Bloomberg, these figures show U.S. inflation has resumed its downward trend after a rebound at the beginning of 2024. While U.S. inflation has been overall declining, the annual headline inflation rate in Mexico has been rising for four straight months.
Janneth Quiroz, director of economic analysis at Monex, explained that inflation data in the U.S. supports investors’ bets on a continuing downward trend toward the Federal Reserve’s target of 2%. However, in his most recent appearance before Congress, the head of the Federal Reserve Jerome Powell refrained from giving further details as to when any rate cuts would take place.
Bank of Mexico policy meeting indicates a divided board
The minutes from the most recent monetary policy meeting of Mexico’s central bank were also published on Thursday, revealing a split board vote on lowering the interest rate. Three members of the governing board are open to resuming the discussion of interest rate cuts in upcoming monetary policy meetings.
The current interest rate is 11%, the rate it has been since March, when the board voted to cut the rate from a record-high rate of 11.25%.
The Banxico minutes reveal that central bankers discussed the post-election volatility in the local market as being due to idiosyncratic factors. Bloomberg said these factors, which the bank does not mention, include Morena’s supermajority in Congress after Claudia Sheinbaum won the presidential election.
With reports from La Jornada, El Financiero, Bloomberg Línea, El Financiero and Forbes
MND Thank you for this timely report. I wondered what was going on and real-time you read my thoughts and answered my questions
Nobody in there right mind would borrow money at 11% most all large monetary transactions in Mexico are foreign money or done in cash. Mexico interst rate 11% is irrelevant….high interest rates are to make for strong peso no other reason
Thanks for the report. You are the gold standard for Mexico news.
The “peso” is NOT STRENGTHING, it is losing its value. Don’t confused the people of Mexico, especially the “poor” telling them that the “peso” is solid. When the “peso’ value is equivalent to the US “dollar”, that is what you want to advertise. Trading at 17.73 is nothing to “brag” about. Watch it go up to 19 or 20 “pesos’ to the dollar after Oct. 1st. You people who work for the government, are good at telling lies.
in other news, as reported on Yahoo Finance this morning . . .
” WASHINGTON (AP) — Wholesale prices in the United States rose by a larger-than-expected 2.6% last month from a year earlier, a sign that some inflation pressures remain high.
The increase, the sharpest year-over-year increase since March 2023, comes at a time when other price indicators are showing that inflation has continued to ease . . .
Excluding food and energy prices, which tend to bounce around from month to month, so-called core wholesale prices increased 0.4% from May and 3% from June 2023.”
SO WHICH IS IT??? decreasing or increasing . . . fyi, prisilla peppers have been increasing in price for the past 6 plus months . . . my “best buy” was $1.99usd for four, today 3 for $2.99usd . . . California pricing???