Mexican Peso Strengthens Ahead of Fed Announcement
The exchange rate hovered around the key 20-peso-per-dollar level as investors awaited tomorrow’s U.S. Federal Reserve (Fed) monetary policy decision and its outlook.
On Tuesday, the Mexican peso depreciated slightly, fluctuating around the crucial 20-peso mark against the dollar. Traders remained cautious ahead of the Fed’s policy announcement and its potential implications.
The peso closed the session at 19.9348 per dollar, compared to a reference price of 19.9270 from LSEG. With Mexico’s central bank (Banxico) not recording an official exchange rate yesterday due to a holiday, the peso registered a minor 0.04% loss, less than a cent.
The dollar traded within a range, hitting a high of 20.0964 and a low of 19.9155. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, fell 0.14% to 103.27 points.
Fed Interest Rate Announcement
Investors are closely watching the Fed’s policy announcement tomorrow. While no interest rate changes are expected, all eyes will be on Fed Chair Jerome Powell’s remarks, particularly regarding the impact of the new tariff policies.
The Organization for Economic Cooperation and Development (OECD) warned yesterday that U.S. tariffs imposed by President Donald Trump on key trading partners could weigh on the economies of Canada, Mexico, and the U.S., while also driving inflation higher.
Market participants are eager to see whether the Fed confirms its forecast of two rate cuts this year. If Powell reinforces this outlook, the peso could remain below the 20-per-dollar level for a while.
Vladimir Putin Impact
Investors were also digesting the outcome of a call between Trump and Russian President Vladimir Putin regarding the war in Ukraine. Putin agreed to a one-month suspension of attacks on Ukraine’s energy infrastructure, though he did not agree to a full ceasefire.
With ceasefire negotiations in Ukraine and the Fed’s upcoming decision, the market remains on edge. While rate changes are unlikely, the Fed’s signals about future moves will be critical for investors.
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