Mexican Peso Advances on Fed Rate Cut Bets

The Mexican peso is appreciating against the U.S. dollar on Wednesday morning, benefiting from a global retreat of the greenback while traders closely monitor the testimony of Federal Reserve Chairman Jerome Powell.

The spot exchange rate stands at 17.8287 pesos per dollar. Compared to yesterday’s close of 17.9143, according to the official data from the Bank of Mexico (Banxico), this represents an improvement of 8.56 centavos, or 0.48 percent, for the peso.

The dollar’s price is fluctuating within an open range, with a high of 17.9060 pesos and a low of 17.7661 pesos. The Dollar Index (DXY) from the Intercontinental Exchange, which measures the greenback against a basket of six currencies, was down 0.09% at 105.04.

Federal Reserve Chairman Jerome Powell will speak before the House of Representatives on Wednesday, after highlighting progress in combating inflation in his testimony to the Senate yesterday. Powell mentioned that more data is needed before considering a rate cut.

USD/MXN

While Powell’s statements to Congress have fueled expectations of a rate cut in the United States, in Mexico, higher-than-expected inflation data has raised doubts about the possibility of Banxico lowering its rates.

In response to the data, Deputy Governor Jonathan Heath remarked that the rise in the general price index is “very concerning,” while Deputy Governor Galia Borja noted that it is prudent for the central bank to avoid making a “hasty decision” regarding its rate.

The possibility of the Fed cutting its rate while Banxico maintains its rate supports the peso due to the attractive rate differential.