Mexican Peso Advances Following U.S. Inflation Data and Banxico Minutes

The Mexican peso appreciated against the dollar on Thursday, extending its weekly gains. This movement was supported by a weakening of the U.S. dollar after U.S. inflation data for June came in lower than expected.

The exchange rate ended the session at 17.7871 pesos per dollar. Compared to Wednesday’s close of 17.8078 pesos, according to data from the Bank of Mexico (Banxico), this represented a gain of 2.07 cents or 0.12% for the local currency.

The dollar traded in a range with a high of 17.8920 pesos and a low of 17.7661 pesos. The Dollar Index (DXY) from the Intercontinental Exchange, which compares the dollar to a basket of six major currencies, fell 0.54% to 104.48 units.

U.S. consumer prices unexpectedly fell in June. The overall Consumer Price Index (CPI) decreased by 0.1% month-over-month and grew 3.0% year-over-year in June, while the core inflation rate increased by 0.1% and 3.3% annually, both below expectations.

Locally, the peso showed mixed reactions to Banxico’s meeting minutes. The minutes revealed that the central bank’s board foresees an inflationary environment that will allow discussions on adjusting its key interest rate.

The peso responded to the U.S. inflation report, which showed greater-than-expected moderation in June, leading traders to anticipate a near-term interest rate cut by the Federal Reserve. Investors reinforced their bets on peso-denominated assets following the U.S. inflation data, pushing the currency to six-week highs.

Tomorrow, investors await the U.S. Producer Price Index data, which is expected to provide more clarity on the future of U.S. interest rates. For the week, the Mexican peso has accumulated a gain of approximately 1.6%.