At the opening of markets today, the US dollar was trading at an average of 18.80 Mexican pesos, marking a 0.92% increase from the previous session’s rate of 18.63 pesos. This rise is part of a broader trend that has seen the dollar increase by 3.63% over the past week and accumulate an 11.96% gain over the last year.
This marks the sixth consecutive session of gains for the dollar, highlighting a period of sustained appreciation. Notably, the recent volatility of the dollar has been lower than its average volatility over the past year, suggesting a period of relative stability in recent days.
The peso’s depreciation follows closely on the heels of a reported marginal growth in Mexico’s quarterly Gross Domestic Product (GDP), primarily driven by secondary and tertiary sectors. This economic context has resulted in the peso recording its second consecutive drop against the dollar.
The Bank of Mexico (Banxico) has forecast a continuation of these economic contrasts through 2024. The central bank anticipates the dollar will trade between 17.68 and 18.67 pesos throughout the year. This forecast is considered conservative, especially given the peso’s unexpected strength in 2023 when it broke the 17 pesos per dollar threshold, a level not seen in eight years.
Inflation in Mexico is expected to follow a downward trend after peaking at a historic high of 8.7% at the end of 2022. Banxico predicts inflation will decrease to 4.02% in 2024, although achieving the ideal rate of 3% remains unlikely in the near future.
Conversely, the central bank projects GDP growth of 2.29% for 2024, reflecting a cautious optimism about the country’s economic prospects. The mixed economic signals underscore the complexity of the financial landscape in Mexico as it navigates the challenges and opportunities of the coming year.
