Mexican Peso Weakens Amid U.S. Tariff Concerns

The Mexican peso lost ground as the U.S. dollar strengthened broadly due to concerns over the economic outlook presented by the Federal Reserve.

On Thursday, the peso depreciated against the dollar in market trading. The local currency weakened as the greenback gained strength, driven by worries about the economic outlook outlined by the Federal Reserve.

The exchange rate closed at 20.1481 pesos per dollar. Compared to yesterday’s closing price of 20.0540 pesos, based on official data from the Bank of Mexico (Banxico), the peso saw a loss of 9.41 centavos, equivalent to a 0.47% decline.

Throughout the session, the dollar fluctuated between a high of 20.2702 and a low of 20.0262 pesos. The U.S. Dollar Index (DXY) from the Intercontinental Exchange, which measures the greenback against a basket of six major currencies, rose 0.32% to 103.80 points.

Central Bank Outlooks

The Federal Reserve kept interest rates unchanged in its latest policy decision. However, the central bank raised its year-end inflation forecast and lowered its expectations for U.S. economic growth.

The peso is under pressure due to dollar strength following the Fed’s decision. Analysts highlighted that Fed Chair Jerome Powell mentioned the impact of tariffs on inflation and the economy in his speech.

Similarly, European Central Bank President Christine Lagarde warned that a trade war with the U.S. could significantly impact economic activity in the eurozone, potentially leading to higher inflation.

Against this backdrop, the euro weakened against the dollar, trading around 1.0850. Against the Mexican peso, the euro closed at 21.8469 pesos, marking a gain of 3.24 centavos (0.15%) compared to yesterday’s closing price of 21.8793 pesos.

Expectations and Key Indicators

In contrast to the Fed’s announcement, analysts anticipate that Banxico will cut its key interest rate again in its decision next week, with an expected 50-basis-point reduction, mirroring its move in early February.

Meanwhile, in the U.S., new jobless claims rose slightly last week. In Mexico, the National Institute of Statistics and Geography (INEGI) reported that economic activity likely contracted by 0.7% year-over-year in February, according to the Global Indicator of Economic Activity (IGAE).