2025.06.2621:10:55UTC+00Mexican Peso Strengthens After Banxico

The Mexican peso strengthened toward 18.86 against the US dollar, reaching a ten-month high, even after Banxico's 50 basis point rate reduction to 8%. This move had been anticipated and occurred amid a downturn in US Treasury yields and a weaker dollar, resulting in only a slight decrease in Mexico's interest-rate differential. Global investors have been turning to higher-yielding emerging-market assets, prompted by the US Federal Reserve's signals of a more patient approach, pushing the dollar index to two-year lows. Mexico remains a top contender among G20 nations due to its attractive real-rate outlook, once adjusted for its 4.5% year-on-year headline inflation and 4.2% core consumer price index. Solid trade and fiscal inflows in May, including a $1 billion external surplus and a 7% increase in revenue, have supported peso demand alongside evidence of GDP growth in the second quarter. Additionally, Banxico’s commitment to re-tighten monetary policy if inflation strays from its 3% target has strengthened confidence in its consistent policy approach.