MEXICAN PESO FALLS FURTHER AGAINST US DOLLAR AMID DIVERGING CENTRAL BANK STANCES

• Mexican Peso drops down for second day, losing 0.24%.
• Powell's cautious inflation remarks and potential for ongoing tight policy boost USD, aided by high April PPI.
• Contrasting Powell, Banxico's Ceja hints at possible rate cuts, contributing to Peso's decline ahead of June 27 meeting.

The Mexican Peso extended its losses against the US Dollar for the second straight day, following hawkish remarks by Federal Reserve (Fed) Chair Jerome Powell and dovish remarks by Bank of Mexico Governor Victoria Rodriguez Ceja. The Mexican currency is down 0.56% in the week. The USD/MXN trades at 16.84 and records gains of 0.24%.

Fed Chair Jerome Powell said he’s not expecting a “smooth road on inflation,” adding that it is moving lower and that “my confidence on that is not as high as it was before.” He expects the Gross Domestic Product (GDP) to grow by 2% or better with a strong labor market.

Powell noted that restrictive monetary policy “may” take longer than expected to do its work and bring inflation to the Fed’s 2% goal.

Earlier, the US Department of Labor revealed that the Producer Price Index (PPI) for April was higher than expected, in some measures, prompting investors to buy the Greenback. US Treasury yields edged up, while US equities trended lower before recovering at the time of writing.

On Monday, Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja said, “We could evaluate downward adjustments” to the main reference rate. She added that while general inflation has continued to rise, underlying prices have not. Therefore, depending on the evolution of the inflationary outlook, Banxico could evaluate continuing its easing cycle as soon as the next meeting on June 27. These comments came after the Mexican central bank kept the main reference rate unchanged at 11% last Thursday.