Mexican Peso Dives as Market Awaits Fed Rate Decision

The Mexican peso has continued its downward trend against the US dollar, depreciating by over 1% on Wednesday. The spot exchange rate reached 17.50 pesos per dollar at 3:20 p.m. Mexico City time.

This decline is linked to market expectations of further interest rate increases in the United States. The probability of another rate hike by the Federal Reserve in October stands at around 54%.

According to Felipe Barragán, a Pepperstone analyst, the recent Fed rate increase and hawkish rhetoric from officials have strengthened expectations of up to three additional 25-basis-point hikes by mid-2027.

The Bank of Mexico is set to make its monetary policy decision on Thursday at 4:00 p.m. local time, with traders expecting the key rate to remain unchanged at 6.50%.