The USD/MXN currency pair settled above Friday’s low of 18.7992, its weakest level since August 20th 2024, in the wake of the Mexican central bank’s policy decision, while investors wagered that the Federal Reserve would likely lower interest rates more times and probably sooner than previously anticipated.
Banco de México cut its key policy rate by 50 basis points to 8% at its June meeting, with annual inflation rising to 4.51% by mid-June and the local economy growing moderately in April.
The central bank indicated that it could continue with similar 50 bps reductions, as the disinflation process is expected to allow some further monetary easing.
Still, Banco de México said it would proceed with caution amid elevated global uncertainty, ranging from trade tensions to geopolitical conflicts, which could either reignite inflation through Peso depreciation or lead to deeper economic slowdown.
In the US, annual core PCE inflation picked up to 2.7% in May from a revised up 2.6% in April, data by the Bureau of Economic Analysis showed.
And, annual PCE inflation accelerated to 2.3% in May from a revised up 2.2% in April.
But, US consumer spending surprisingly dropped in May as the boost from the preemptive purchases of goods such as motor vehicles ahead of tariffs waned.
Markets are now pricing in about 65 basis points of rate cuts by the Federal Reserve by the end of this year, compared to 46 basis points a week ago.
In the meantime, media reports stated that US President Trump could announce his Fed Chair nominee as early as September or October, as he would likely favor a candidate who supports looser monetary conditions.
The USD/MXN currency pair settled 0.30% lower at 18.8144 on Friday.
The exotic Forex pair lost 1.88% for the week.
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