The Mexican peso rallied against the dollar after U.S. April inflation data came in below expectations, while investors brace for Banxico’s likely 50-basis-point rate cut on Thursday.
The Mexican peso registered a notable gain against the U.S. dollar on Tuesday morning, buoyed by a broad-based retreat in the greenback following softer-than-anticipated U.S. inflation data. According to Bank of Mexico (Banxico) figures, the spot exchange rate stood at 19.5100 pesos per dollar, improving by 0.0939 pesos—or 0.48 percent—over Monday’s official close of 19.6039.
Trading activity saw the dollar fluctuate between a session high of 19.6405 and a low of 19.5029 pesos, reflecting heightened volatility as market participants digested the latest U.S. consumer price index (CPI) release. The Intercontinental Exchange’s Dollar Index (DXY), which gauges the greenback against a basket of six major currencies, slid 0.49 percent to 101.31 points on the day.
U.S. CPI data for April showed headline inflation rising 2.3 percent year-over-year, undercutting the 2.4 percent consensus estimate, while core inflation—which strips out volatile food and energy prices—held steady at 2.8 percent, matching both forecasts and the previous month’s reading. The cooler inflation prints have rekindled debate over the Federal Reserve’s path forward for monetary policy, with investors weighing the likelihood of fewer rate hikes or an earlier pivot to easing.
“The news is likely to generate volatility for the rest of the day, as it could influence perceptions of U.S. economic health and the Federal Reserve’s upcoming monetary policy decisions,” said Felipe Mendoza, analyst at ATFX.
On the domestic front, attention now shifts to Banxico’s policy announcement scheduled for Thursday. A broad consensus among economists is that the central bank will deliver a third consecutive cut of 50 basis points, taking its benchmark rate down to 8.50 percent. Such a move would underscore Banxico’s commitment to supporting economic activity amid moderating inflation pressures, though it may also test the peso’s resilience if global risk sentiment shifts.
In the run-up to Thursday’s decision, traders will be closely monitoring any signals from Banxico officials regarding the pace and scope of future rate adjustments, as well as incoming data on Mexico’s own inflation trajectory. For now, the peso’s advance on Tuesday underscores its sensitivity to both international drivers—such as U.S. price dynamics—and domestic policy expectations.
