Mexican Peso stumbles against a soft US Dollar
Mexican Peso softens after Fed’s 50 bps rate cut.- Fed projects federal funds rate at 4.4% for 2024, balancing price stability and employment goals.
- Investors await Banxico’s upcoming decision with a 0.25% rate cut expected on September 26.
The Mexican Peso softens slightly against the US Dollar during the North American session on Thursday after the Federal Reserve (Fed) lowered interest rates for the first time in four years. Data from the United States (US) failed to spark a movement on the exotic pair as the USD/MXN trades at 19.31, post modest gains of over 0.17%.
A scarce Mexican economic docket leaves the emerging market currency leaning into the dynamics of the US economy. On Wednesday, the Fed cut rates by 50 basis points (bps) as it grew confident that inflation will “sustainably” attain its 2% goal and the labor market won’t soften further. In its monetary policy statement, Fed Chair Jerome Powell acknowledged that the dual mandate of price stability and maximum employment is now roughly balanced while noting that the economic outlook remains uncertain.
In the same meeting, Fed officials updated the Summary of Economic Projections (SEP) or Dot Plot, in which they foresee the federal funds rate finishing 2024 at 4.4%.
Recently, the US Department of Labor revealed that the number of Americans filing for unemployment benefits for the week ending September 14 was lower than expected but improved compared to the last reading.
The USD/MXN exotic pair rose toward a daily high of 19.40 after the data as this could dent the US central bank from easing policy aggressively, instead sticking to quarter percentage point reductions.
Meanwhile, investor eyes are on the Bank of Mexico (Banxico), which is expected to lower rates by 0.25% at the September 26 monetary policy meeting decision.
