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The US Dollar Keeps Going Down While Internal US Consumption Weakens

March 17, 2025 (Investorideas.com Newswire) Investorideas.com, rated as a top 100 investment website for investing ideas, issues market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.

"The U.S. dollar started the week under considerable pressure, hit by economic data that heightened uncertainty regarding the strength of domestic consumption and, consequently, the Federal Reserve's monetary policy outlook.

The latest retail sales figures for February revealed a weak monthly growth of 0.2%, notably below the expected increase of 0.6%. Even more concerning was the downward revision of January's figures, indicating a deeper decline in U.S. consumer spending during the early months of the year. Out of the thirteen monitored categories, seven experienced notable declines, particularly in restaurants and bars, gas stations, clothing, and motor vehicles and parts-key sectors suggesting a moderation in consumer willingness to spend on discretionary items.

Despite a 3.1% annual growth rate, these numbers have heightened concerns about the resilience of the U.S. consumer, a key driver sustaining much of the country's economic activity. This scenario complicates the environment in which the Fed will make its interest rate decision this week. Investors are closely awaiting comments from Chair Jerome Powell, whose tone could significantly shape the trajectory of the dollar and global financial markets in the short term. A dovish message could boost risk assets, further pressuring the greenback downward. Conversely, a more cautious tone could provide temporary support to the dollar, offering some relief from recent declines.

The current context has particularly sensitive implications for Latin America, especially Mexico, whose currency shows a dual reaction to the U.S. outlook. If the Federal Reserve opts for a more accommodative stance, reducing expectations for future rate hikes, the Mexican peso could appreciate, attracting greater investment flows into emerging-market assets. However, this positive effect could quickly be mitigated by rising concerns over a potential U.S. recession, limiting the peso's ability to consolidate sustained gains.

The Mexican economy, highly dependent on the U.S. market, faces a particularly delicate situation, as any further deterioration in North American economic data could generate significant repercussions. This context demands close monitoring by investors and economic authorities, aware that the dollar's volatility and Fed communications will significantly influence market behavior in the coming days.

In summary, the U.S. dollar is at a critical juncture. The combination of weak retail sales and doubts about the health of domestic consumption has put markets on high alert ahead of the Fed's upcoming meeting."

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