The Federal Reserve’s restrictive monetary policy is expected to come to a halt next year as market expectations indicate that lower borrowing costs will soon be seen. Recent economic data in the United States has shown a continued disinflationary process, with PCE consumer spending data registering a monthly decrease of 0.1 percent in November. This has led to a weakening of the US dollar and a boost for the Mexican peso, which reached a minimum in the session of 16.9314 pesos per dollar.
Ricardo Bravo, a fixed income and exchange rate strategist at Vector brokerage house, explained that this movement occurred as a result of last week’s monetary policy announcement from the Federal Reserve. “The Fed is expected to begin lowering interest rates, and in that sense, this supports a strong peso because the rate differential between Mexico and the United States is an important factor that has given strength in recent years to the local currency,” he indicated.
At the close of Friday, December 22, the exchange rate reached 16.99 pesos per dollar. The Mexican currency also beat the dollar in the weekly balance, showing an appreciation of 1.29 percent in the last five days.
From a technical perspective, Gabriela Siller, director of economic analysis at Banco Base, explained that the exchange rate has pierced the key support of 17 pesos per dollar and is likely to consolidate near this level before continuing the downward trend. She also indicated that the next intermediate support is located at 16.90 units per dollar.
Specialists consulted by El Financiero this week indicated that the Mexican peso could undergo some adjustments during the last days of 2023, potentially taking the currency out of its current good levels. Janneth Quiroz, director of economic and exchange analysis, predicted that the national currency will close this year at 17.35 units due to its volatility.