Dollar Closes at 18.844 Pesos After U.S. Annualized Growth of 3.4% in Third Quarter
Key Facts
The U.S. dollar-Mexican peso pair closed at 18.844 on October 29, up from 18.6234 the previous day, according to EL7 data, as U.S. figures showed faster growth in the third quarter and inflation remained elevated. U.S. real gross domestic product rose at an annualized rate of 3.4% in the third quarter, compared with 2.2% in the second quarter, according to the U.S. Bureau of Economic Analysis. The data came a day after the Federal Reserve decided to hold its target rate range at 3.75% to 4%. Two committee members voted to raise the range by a quarter of a percentage point, while the statement was approved by a 10-to-2 majority. The peso's move came amid strong U.S. data and a divided monetary policy stance, without establishing that the growth figures drove the currency's move.
The Bureau of Economic Analysis attributed third-quarter GDP growth to increases in investment, consumer spending and government spending, partly offset by a decline in exports, while imports rose. Data cited by the Associated Press showed consumer spending increased at an annualized rate of 3.8% during the quarter, while business investment excluding housing rose 12.7%. These components show that domestic demand and investment supported activity, despite a negative contribution from exports. GDP growth accelerated from 2.2% in the second quarter to 3.4% in the third. The Bureau of Economic Analysis said real gross domestic product “increased at an annual rate of 3.4% in the third quarter.” The second estimate of U.S. third-quarter growth is scheduled for release on November 25.
On prices, the core personal consumption expenditures price index rose 3.1% in the 12 months through September, compared with 3.0% in August, according to the Bureau of Economic Analysis. This is the September reading announced on October 29, not a rate for the day the data were released. The headline personal consumption expenditures price index also rose 3.6% year over year in September, compared with 3.4% in August. The increases in both readings from the previous month reflect persistent price pressures during the period, with the core index remaining above its August level. The Federal Reserve said in its statement that “economic activity has been expanding at a solid pace” and that “inflation remains elevated.” The decision kept the rate range unchanged despite two members' preference for a quarter-point increase.
In Mexico, investors are awaiting the preliminary estimate of third-quarter GDP, scheduled for release on October 30, according to the National Institute of Statistics and Geography. Mexico's GDP rose 1.5% quarter over quarter and 2.1% from the same period a year earlier in the second quarter, according to the seasonally adjusted series. The new reading will provide a measure of domestic economic performance before third-quarter data are complete. On the same day, Alberto Musalem was scheduled to speak at 12:30 p.m. about the U.S. economy and monetary policy, as part of a meeting of the Federal Open Market Committee. The events follow the Fed's decision to hold rates and two members' votes in favor of an increase, while the dollar-peso pair's close at 18.844 remains the latest level reported in EL7 data.