The Mexican peso weakened beyond 17.8 per US dollar as renewed geopolitical uncertainty and weak domestic data halted its recent rebound. Market skepticism over a potential de-escalation in the Middle East deepened after Iran denied direct negotiations and reports emerged that Saudi Arabia and the UAE might enter the conflict against Tehran. This backdrop strengthened the US dollar and pushed Brent crude back toward 100 dollars per barrel, reigniting global inflation concerns and prompting traders to scale back expectations for Federal Reserve rate cuts in 2026.
On the domestic front, the peso came under additional pressure after Mexico’s economic activity index fell 0.9% month-on-month in January, its weakest reading since late 2024, alongside a 3% contraction in manufacturing. These growth worries were compounded by mid-March inflation of 4.63%, which exceeded analyst forecasts and complicated the policy outlook for the Bank of Mexico.
