U.S. dollar to Mexican peso - The Mexican peso ended Wednesday’s trading at 18.8567 per dollar, marking a 0.56 percent loss from the prior session’s close of 18.7509, according to official data from the Bank of Mexico. The local currency weakened as investors digested a suite of stronger-than-expected U.S. economic figures and the Federal Reserve’s decision to maintain its key policy rate unchanged.
Markets reacted swiftly to the Fed’s announcement, which held borrowing costs at 4.25–4.50 percent for the fifth consecutive meeting. Two committee members dissented, favoring a quarter-point cut, underscoring internal debate over the policy path. Fed Chair Jerome Powell signaled that future actions will hinge on incoming data, maintaining a cautious stance amid global uncertainties.
Peso depreciated against the dollar
The peso depreciated against the dollar as U.S. data reinforced the greenback’s appeal. Second-quarter U.S. GDP growth surprised at 3.0 percent annualized, outpacing economists’ forecasts and dispelling recession fears. Private payroll gains in the ADP report further bolstered confidence in the American labour market, reducing expectations for near-term rate cuts from the Fed.
The Intercontinental Exchange’s Dollar Index (DXY) climbed 1.02 percent to 99.93, its highest level in weeks. Traders noted that resilient U.S. economic momentum may delay Fed easing, attracting capital flows into dollar-denominated assets and exerting downward pressure on emerging-market currencies like the peso.
On the local front, Mexico’s own preliminary GDP figures offered mixed signals. The national economy expanded by 0.7 percent in Q2, topping the 0.4 percent median forecast from analysts polled by Reuters. Manufacturing and services sectors drove the surprise gain, rising 0.8 percent and 0.7 percent, respectively, while agricultural output contracted.
Outperformance isn't enough
Despite this outperformance, the peso failed to rally. Market participants pointed to the widening interest-rate differential between the United States and Mexico and muted foreign inflows. Carry trades—borrowing in low-yield currencies to invest in higher-yield assets—offered limited appeal as global investors awaited clarity on policy direction from major central banks.
Analysts at VT Markets warned that the narrowing yield advantage could keep the peso under pressure. “The interest-rate differential narrows the scope for carry,” they noted, “and may exert upward pressure on the exchange rate”.
Looking ahead, the peso’s trajectory hinges on a blend of factors: Fed communications, U.S. data releases, and domestic monetary policy moves. The Bank of Mexico’s next meeting looms amid market anticipation for further rate cuts, should inflation continue its gradual descent toward the target. Yet, any divergence in policy paths could amplify volatility in the FX market.
For now, the closing range between 18.6990 and 18.8709 per dollar defines the peso’s immediate trading bracket. Resistance sits near the 50-day moving average of 18.91 and the round figure of 19.00, while support holds around 18.69. Investors will watch these technical levels closely as the global economic narrative evolves.
Sources
Banxico official exchange rate data: Banco de México Bank of Mexico
Fed holds rates at 4.25–4.50 percent: Reuters Reuters
U.S. Q2 GDP surprise: Reuters Reuters
Mexico Q2 GDP growth: Reuters Reuters
