The Mexican Peso (MXN) has recently shown signs of volatility, particularly following the U.S. Federal Reserve's decision to cut interest rates by 0.5% on September 18, 2024. This move aims to stimulate economic activity amid slowing growth in the United States and is expected to weaken the U.S. dollar against the peso. On the same day, the peso gained 1.62%, closing at 19.4724 pesos per dollar, recovering from a previous low of 20.1470 [23f2c391].
Prior to this rate cut, the peso had weakened against the dollar, with the exchange rate rising to 19.33 pesos per dollar, marking an increase of over 18% from its lowest point earlier in the year. Analysts had begun predicting the end of the 'super peso' era, with expectations that the USD/MXN pair might rise towards 20.2260 [dd47da86].
Historically, President Andrés Manuel López Obrador (AMLO) has maintained that the peso would remain strong during his presidency, which began in December 2018. At that time, the peso was at 19.65 pesos per USD. It peaked at 25 pesos per USD in March 2020 due to the COVID-19 pandemic but strengthened to 16.39 pesos per USD by April 2024. Currently, the peso is at approximately 19.07 pesos per USD, reflecting a 3% appreciation since AMLO's presidency began [df9d7d89].
The peso had previously appreciated against the dollar, closing at 18.6474 pesos per dollar, largely driven by positive economic indicators from the United States, including a 1.0% growth in retail sales [3ba90c80]. However, the recent uptick in the USD/MXN exchange rate suggested a reversal in this trend, which the recent interest rate cut may help to mitigate.
Market sentiment is influenced by various upcoming economic events, including the Federal Reserve's ongoing assessments of economic conditions. Analysts are closely watching these developments, especially in light of the recent rate cut, which could lead to further fluctuations in the peso's value [23f2c391].
In addition to economic factors, the Mexican tourism industry is facing challenges, as the Sustainable Tourism Advanced Research Center has predicted a decline in flights and seats, raising concerns about the sector's recovery [23f2c391]. This comes at a time when Mexico's Independence Day celebrations occurred from September 14 to 16, 2024, which typically boosts tourism activity.
Furthermore, Tropical Storm Ileana has formed off Puerto Vallarta, bringing risks of heavy rain and flooding, which could further impact the region's tourism and economic stability [23f2c391]. The peso's resilience is being tested as it opened at 18.85 pesos per dollar recently, reflecting an upward trend after previous volatility [bcbde518]. With the current exchange rate hovering around 19.33, the outlook for the peso remains uncertain as traders assess the implications of both domestic and international economic conditions [dd47da86].