The Mexican peso depreciated to around 18.78 per US dollar in October, its weakest level since October 2025, as sentiment was hit by expectations of a narrowing US–Mexico interest-rate differential, heightened geopolitical risks linked to the conflict in the Middle East, and stalled USMCA negotiations. Anticipation of further monetary easing by the Bank of Mexico, combined with the Federal Reserve’s September rate hike, has eroded the peso’s yield advantage and prompted investors to unwind carry trades.
At the same time, uncertainty stemming from the Middle East conflict has curbed risk appetite, while the lack of meaningful progress in the review of the US–Mexico–Canada Agreement has cast a shadow over the region’s trade outlook. Investors are now focused on Mexico’s inflation report for the first half of October for additional guidance on the central bank’s policy path. Headline inflation is expected to quicken to 3.60% year-on-year from 3.42%, and biweekly inflation is forecast to pick up to 0.37% from 0.33%.
