The Mexican Peso Holds Strong Below 20 Units Per Dollar
This Wednesday, the exchange rate closed at 19.7935 pesos per dollar, representing an appreciation of 1.48% compared to the 20.0911 pesos reported by the Bank of Mexico (Banxico) at the end of Tuesday. The reason behind this appreciation is that the market had anticipated the approval of the judicial reform, which, when finalized early Wednesday, led to a decrease in the exchange rate, as explained by Banco Base. Additionally, Monex points out that the peso's rise was driven by the speculative sentiment of investors, just ahead of the important events that took place yesterday.
Yesterday, the discussion and vote on the judicial reform proposed by President López Obrador began in the Senate. After an extensive session marked by disputes and protests, it was approved with 86 votes in favor, 41 against, and no abstentions. The appreciation of the peso was also linked to the weakness of the dollar, which fell by 0.11% according to the weighted index, after the overall inflation in the United States for August decreased to 2.53% annually, marking the fifth consecutive month of decline and reaching its lowest level since February 2021, as reported by Banco Base. "The drop in inflation increases the likelihood that the Federal Reserve will cut interest rates on September 18 and could lead the Fed to adopt a more aggressive approach with rate cuts," they explained. For the overnight session, the peso is expected to fluctuate between $19.73 and $19.90, considering the current trend and the anticipation of economic data set to be released tomorrow in the United States (PPI and unemployment claims).
The fluctuation of the peso against the dollar is a key indicator not only of Mexico's internal economic health, but also of the interconnectedness between the economies of Mexico and the United States. Decisions made by the Federal Reserve and local political dynamics can significantly impact the exchange rate, which is crucial for investors and consumers alike. Staying informed about these factors will help in making more informed financial decisions.
