FX.co ★ Mexican Peso Loses Ground

The Mexican peso is approaching 20.5 per USD, edging closer to the three-year low of 20.85, which has been a critical level of support since early 2025. This decline is largely driven by escalating global trade tensions and persistent domestic inflation pressures, which have dampened the currency's attractiveness. Initially, Mexico benefited from being exempted from President Trump's extensive 10% import tariffs, leading to optimistic expectations for nearshoring and reliable access to the U.S. market. However, investor confidence has since waned. The economic outlook has become more challenging following China’s retaliation with a 34% tariff on U.S. goods, accentuating worries over the collapse of global trade and decreased external demand. Additionally, uncertainty regarding Mexico’s potential vulnerability to U.S. auto tariffs continues to cast a shadow over forecasts. On the domestic front, inflation remains uncomfortably high, complicating the Bank of Mexico's policy decisions as it navigates the need to maintain an appealing interest rate differential while facing increasing urgency to bolster a slowing economy.