FX.co ★ Mexican Peso Near July 2024 Highs

The Mexican peso advanced towards 18.45 per USD, approaching its high from July 2024, buoyed by decreasing domestic inflation and a reserved stance from the Bank of Mexico. In October, headline CPI fell to 3.57%, with core inflation easing to the low 4% range. Banxico's 25 basis point reduction to 7.25% was marked by a cautious, data-driven approach, suggesting a gradual policy easing rather than a sudden shift, thereby reducing the likelihood of unexpected moves. As this adjustment was anticipated, its direct effect on yields was minimal. Instead, markets responded by adjusting risk premiums and enhancing carry trades that favored peso-denominated assets. Meanwhile, indications of softer U.S. economic growth and the conclusion of the longest government shutdown diminished demand for the dollar as a safe haven. Additionally, mixed U.S. economic data, including initial jobless claims at 232,000 and continuing claims at 1.957 million, along with market expectations of about a 47% chance of a December Federal Reserve rate cut, further weakened support for the dollar and boosted the attractiveness of Mexican financial instruments.