Mexican peso drops 1.54% a day before Banxico’s announcement

The Mexican peso depreciated sharply in Wednesday’s trading session, falling amid uncertainty caused by progress in Congress regarding new constitutional changes, just one day before the anticipated announcement from the Bank of Mexico (Banxico).

The exchange rate ended the session at 19.6400 pesos per U.S. dollar. Compared to yesterday’s close of 19.3371 units, based on official data from the central bank, this movement marked a decline of 30.29 centavos for the peso, equivalent to a 1.54% drop.

The dollar traded in an open range, reaching a high of 19.6875 units and a low of 19.3125 units. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.50% to 100.97 points.

Investors are awaiting tomorrow’s monetary policy decision from Banxico. Following inflation data from the first half of September that confirmed easing price pressures, expectations for a 50-basis-point rate cut have strengthened.

Some analysts also attributed part of the peso’s decline to concerns over progress in Congress related to new constitutional amendments, following the approval of a reform placing the National Guard under military control. While the expectation of a sovereign rate cut in Mexico is rising, it does not fully offset the risks stemming from the country’s legal and political environment, leading traders to shift towards more stable assets.

On a broader scale, the U.S. dollar rebounded after hitting its weakest level in 14 months against major currencies, during a day lacking significant economic data and ahead of a speech by Federal Reserve Chairman Jerome Powell and upcoming labor figures.

Following the Fed’s 50-basis-point rate cut, investors are still anticipating another significant adjustment in November. In this context, U.S. inflation data set to be released later this week gains added importance.