Dollar falls due to the slowdown in inflation in the US: Mexican Peso appreciates and reaches its historical maximum in seven years

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The US Dollar takes a hit as May’s inflationary pressures slow

The US dollar suffered a setback on Tuesday as inflationary pressures slowed down more than expected in May, leading to a stronger belief that there will be a pause in future rate hikes.

The Mexican Peso gains ground against the American Dollar

The Mexican Peso ended Tuesday’s session for the first time in seven years, near the 17.20-unit line, against the US dollar. This followed the release of data that strengthened the belief of a pause in interest rate increases in the United States.

The exchange rate ends the day at 17.2063 units per greenback

The exchange rate ended on Tuesday at 17.2063 units against the US dollar, according to official data from the Bank of Mexico (Banxico). The currency advanced 6.61 cents or 0.38% compared to yesterday’s closing rate of 17.2724 units.

Inflationary pressure drop in May leads to a decrease in US dollar price

Data from the Labor Department shows the consumer price index rose 0.4% in May, its smallest increase in more than two years. This led to a decrease in inflationary pressure, which in turn had a direct impact on the US dollar price.

Dollar index falls as the Mexican Peso sees an upward trend

The Dollar Index (DXY), which measures six references, saw a decline of 0.34% to 103.30 points. The parity touched a minimum of 17.2004 pesos per dollar, a level unseen since the beginning of May 2016, around seven years ago.

The Federal Reserve is expected to keep rates unchanged

Market players are awaiting tomorrow’s announcement from the Federal Reserve (Fed) on its monetary policy decision, after a two-day meeting. Most commentators expect the Fed to keep its rates unchanged for the first time since March 2022, when the cycle of increases began.

Monex points to the likelihood of a change in the Fed’s monetary tightening cycle

According to Monex, “the local currency was favored by the expectation that the Fed will consider stopping its current upward cycle of monetary tightening due to the faster-than-expected reduction in May inflation in the United States.”

The market anticipates little change in the Fed’s reference rates

According to the Fed Watch tool of the Chicago Stock Exchange (CME Group), there is a 90.8% probability that the central bank will keep its reference rate unchanged in the range of 5% to 5.25% after tomorrow’s announcement.

For more information, email jose.rivera@eleconomista.mx

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