Mexican Peso Gains on CPI Data

The Mexican consumer price index eases for the fifth month in a row in September. Its results raised the expectations of more interest rate cuts in the future.

According to the data from INEGI statistics agency, the CPI climbed 3.00% in September on a year-on-year basis. On a month-on-month basis, it rose 0.26%.

This figure translates to the lowest monthly figure for a headline annual rate since September 2016. At the same time, this falls in line with the central bank’s goal rate of 3%. They have added a 1% tolerance threshold above or below the level.

The peso strengthened after the news.

On the flip side, financial group Banorte said that the peso still could decline close to 9% against the buck. That will probably happen if US President Donald Trump threatens Mexico in his re-election campaign.

Trump’s Previous Comments Pummel the Mexican Peso

The US president has previously sent the peso to lows after attacking the country through Twitter.

Trump’s attacks have mostly been about immigration and trade. He has previously threatened to slap some tariffs on the country’s goods. Other times, he threatened to close US-Mexico border.

According to Gabriel Casillas, it’s probable that the US leader will become more aggressive in this protectionist rhetoric.

The rhetoric will be at a migratory and commercial levels. The Casillas, who is Banorte’s director of economic analysis, this will cause a rise in the greenback.

This Friday, focus will be on the country’s industrial output, which could leave the peso in tight ranges.

Still, the central bank now has more reasons to continue the rate easing at a gradual pace. This also makes it highly possible to see a 50-basis-point cut in the future.

Elsewhere, the US dollar sustained weakness during early trading as speculations surface ahead of high-profile trade talks.