Peso Retreats as PCE Data Revives Rate Hike Bets

The Mexican peso's two-year rally has hit its first concrete data-driven setback. The dollar rose to a one-week high against the currency after two pieces of US economic data landed ahead of Federal Reserve Chair Kevin Warsh's debut Jackson Hole keynote. On Thursday, the dollar climbed to 16.99 pesos per dollar in early trading before pulling back to approximately 16.97.

The move came as investors absorbed the combination of Wednesday's Personal Consumption Expenditures price index print and Thursday morning's jobless claims report. The PCE price index held at 3.7% year-over-year in July, beating economists' forecasts for a slight cooling to 3.6%. Core PCE, which strips out food and energy and is the measure Fed policymakers most closely track, also came in hotter than expected.

Cleveland Fed President Beth Hammack used her live CNBC interview from Jackson Hole on Thursday to restate her case for an immediate rate hike. 'I don't want to prejudge anything. But I believe now is the time to act,' she said. Chicago Fed President Austan Goolsbee struck a more cautious tone but expressed concern about inflation's persistence.