The Mexican peso hovered around 17.3 per USD in late May as investors tracked both geopolitical and domestic economic developments. On the external front, markets focused on progress in peace talks between the United States and Iran, mediated by Pakistan. The two countries reportedly moved somewhat closer to a potential agreement to end the conflict, but persistent disputes over Tehran’s uranium stockpiles and control of the Strait of Hormuz continued to block a final accord.
At home, market participants digested revised GDP figures showing that Mexico’s economy contracted by 0.6% quarter-on-quarter in the first quarter, while posting a modest 0.2% expansion year-on-year. Inflation also cooled more than anticipated in the first half of May, although it remained above the central bank’s target, with annual CPI easing to 4.1%.
These developments came on the heels of a series of sovereign rating actions. Moody’s downgraded Mexico’s long-term credit rating to “Baa3,” the lowest rung of investment grade, while S&P Global Ratings revised the outlook on the country’s “BBB” rating to negative, underscoring concerns about Mexico’s fiscal and macroeconomic outlook.
