FX.co ★ Mexican Peso Holds Strong After Banxico

The Mexican peso appreciated beyond 18.6 against the US dollar, recovering from an eight-week low, as investors assessed the recent Bank of Mexico (Banxico) decision against the backdrop of a weakening US dollar. In a 4 to 1 vote, Banxico executed the anticipated 25 basis point rate cut, bringing it to 7.25%. Nevertheless, its statement was more balanced than expected, with a notable dissent indicating that further rate cuts will be gradual, emphasizing the board's continued vigilance against inflationary risks. This communication strategy effectively mitigated direct pressure on the currency. In the domestic sphere, inflation has shown signs of easing, with the headline inflation rate at approximately 3.63% and core inflation at around 4.24%. This development allows the central bank some room to maneuver, while reducing uncertainty regarding the medium-term inflation trajectory. Simultaneously, the US dollar weakened from its recent highs amid the ongoing US government shutdown and concerns about a more pronounced slowdown in the labor market, highlighted by the highest number of job cuts announced for October in 22 years.