Mexican Peso falls amid hawkish Fed, and rate cut expectation roil currency
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Mexican Peso weakened by political uncertainty following June 2 elections and upcoming judicial reforms by President AMLO. Political turmoil and judicial reform concerns in Mexico lead to over 10% depreciation since June 2 election. Fed Chair Powell expresses caution about inflation, signaling readiness to adjust policy if economic conditions change. USD/MXN trades at 18.76, gaining over 1% after Fed holds rates steady and revises down rate cut expectations. The Mexican Peso remained on the defensive, extending its losses for the second straight day against the US Dollar after the Federal Reserve (Fed) decided to keep rates unchanged and downward revised interest rate cuts from three to just one. At the time of writing, the USD/MXN trades at 18.76, gaining more than 1%. On Wednesday, the Fed maintained rates unchanged. They expressed that they’re not expecting that reducing rates would be appropriate, as they remained unconfident that inflation is moving sustainably toward 2%. They added that the Committee would be prepared to adjust the monetary policy stance as appropriate. The Summary of Economic Projections (SEP) revealed that policymakers backpedaled. They were expecting three rate cuts, but most estimate just one toward the end of the year. Meanwhile, the economy is expected to grow above 2%, while the headline Personal Consumption Expenditure (PCE) Price Index and core PCE were upward revised. Aside from this, Fed Chair Jerome Powell stated that they remain less confident about inflation than previously “in order to cut.” He added, “if jobs are to weaken unexpectedly, the Fed is ready to respond.” When asked about today’s US inflation report, he said that it’s just one report and that they need to see the deflation process evolve toward the Fed’s goal. Mexico’s political turmoil has weakened the Mexican currency by more than 10% following the June 2 general election.…
Filed under: News - @ June 13, 2024 3:12 am