The euphoria unleashed by the level of the Mexican peso, which on July 12 reached its best level since December 7, 2015, should be balanced with the figures and data of what is happening in the world, because that explains today, as It has been in recent years, the extreme strength of the Mexican currency.
In essence, the “neoliberal forces” applied their recipe totally attached to the manual, and everything seems to be starting to work, without ruling out eventual shocks in the coming weeks.
One piece of information was enough, that of inflation for the month of June in the United States, for jubilation to break out at least for a moment, taking the Mexican peso, as well as other currencies, to maximums not seen in a long time, before the collapse of the dollar, which ironically falls, driven by the optimism! generated by the figures and speculation about what the Fed will do in the coming months. In short, everything that happens around the exchange rate in Mexico and currencies in general in the rest of the world is full of pure neoliberalism.
The dollar collapses due to optimism about its economy
The dollar fell to a new low not seen in more than a year last Wednesday, after data showed that the rise in US consumer prices moderated during the month of June. Inflation performance suggests the Fed may have to raise interest rates just one more time this yearno longer twice as was projected before Wednesday and as even the president of the organization himself, Jerome Powell, anticipated.
Thus, the dollar index (which contemplates a basket of currencies of industrialized nations), depreciated to 100.54 units, it is its lowest level since April 2022, at the end it also registered its largest daily percentage drop since the beginning of February of this anus.
Similarly, the dollar also hit lows against the Swiss franc since early 2015 following the inflation report, it was its lowest level since the Swiss National Bank removed the local currency peg in January 2015.
The core inflation figure released in the United States reinforced the market’s initial perception of the latest Fed rate decision that the central bank of The United States could only raise the rate one more time in this cyclewhich is currently in a range of 5.0 to 5.25 percent.
It is a fact that the futures of the United States rates show that the operators expect the reference rate to rise a quarter of a point, to a range of 5.25 to 5.50 percent, during the Fed meeting scheduled for the 25th and next July 26. However, they now see only a 25 percent chance of another hike before the end of the year, up from a 35 percent chance before the report.
In this context, the fall of the dollar in the foreign exchange markets was widespread and, in fact, the collapse of the US currency continued. For example, the euro rose to its highest level since March of last year, at levels of 1.1134 dollars. Against the Japanese yen, the dollar fell to a six-week low of 138.17 units.
For its part, the pound sterling reached a new 15-month high against the dollar, at levels of 1.30 dollars, with an advance of 0.4 percent during the session, but enough to reach the previously mentioned highs.
neoliberal recipe
Neoliberalism is more alive than ever, at least with regard to monetary and exchange matters. The recipe applied to stifle the inflationary surge was simple, it was in the manual of the foundations of neoliberalism. This recipe has been applied all over the planet, with its different nuances depending on the conditions of each country or region.. Moving the interest rate, adjusting it to the conditions of the markets and the economy, using it as a tool for monetary control, is the neoliberal recipe that dates from the first foundations of said economic trend.
In this context, Mexico is one of the countries that has benefited the most from this neoliberal recipe applied since March of last year in its most acute phase; that is, with the manipulation of interest rates.
The peso has appreciated in the year at a rate of 13.84 percent, it is the second strongest currency in the period only below the Colombian peso, which gains 15.65 percent; Latin America, in fact, has largely benefited from an almost generalized appreciation of its currencies.
Perhaps the good news is that the trend in Latin American currencies could continue, if the Fed raises interest rates just one more time in the year, as the markets now expect. The annual inflation rate of 3 percent during June, in the United States, it is already beginning to approach the 2 percent target and also to look far from that 9.1 percent annual which he played in June of last year.
In economics and finance, nothing is completely good or bad, there are no extremes. What happened with Latin American currencies in general, and with the Mexican peso in particular, is a reflection that the right policies have an effect. Nobody would imagine that exchange rate neoliberalism would take the peso to levels that had not been seen in more than 8 years. Analysts now expect that the floor of 16.5 per dollar will be the definitive one in this upward streak of the peso, but since it is tied to the trajectory of capital and monetary conditions, the truth is that nothing is certain. No one is bigger than the market.
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