FX.co ★ Mexican Peso Retreats as Banxico Eases Monetary Policy

The Mexican peso weakened to around 18.8 per US dollar after Banxico cut its benchmark interest rate by 25 basis points to 6.25% at its November 2026 meeting, contrary to market expectations for no change. The central bank stated that the disinflation process was ongoing and assessed that existing economic slack would limit the pass-through from exchange rate movements to consumer prices. It also signaled that keeping rates at this new level for an extended period would support inflation’s convergence toward its target while helping to address external macroeconomic challenges. At the same time, the narrower interest rate differential between Banxico and the US Federal Reserve has reduced the appeal of peso-denominated carry trades, putting further pressure on the currency. The peso also gave back part of the gains made after the Democratic Party’s victory in the US midterm elections, as markets interpreted the result as a potential constraint on the Trump administration’s ability to maintain elevated tariffs on foreign trade.