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Mexican peso rises as US inflation data cools dollar expectations
USD/MXN was last at 17.38 after US PPI fell to 5.5% year over year in June, trimming the odds of additional Fed tightening.
The Mexican peso strengthened against the US dollar in North American trading, rising 0.29% to about 17.38 on a softer read of US inflation. FXStreet said the move reflected reduced expectations for further Federal Reserve hikes after the latest US price data.
FXStreet cited June Producer Price Index inflation of 5.5% year over year, down from May’s 6.0% and below the market’s 6.2% forecast. Core PPI came in at 4.7% year over year, up from 4.6% but still under expectations, which helped pressure the dollar, shown by the US Dollar Index at 100.45 down 0.45%.
Money markets have trimmed the probability of Fed tightening, with Prime Terminal showing 22 basis points of additional tightening priced for later in the year. For the July meeting, FXStreet said traders expect rates to be held steady, while the odds for tightening by December were near 64%.
FXStreet also noted that Mexico’s domestic calendar remained light, while Moody’s downgraded Mexico’s credit worthiness to Baa3, pointing to ongoing pressure around fiscal policy. On Mexico’s recent inflation, it said June inflation fell for a third straight month to the lowest since 2020, with headline inflation at 3.37% year over year and underlying inflation at 4.03%, slightly above Banxico’s 3% plus or minus 1% goal.
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