FX.co ★ Mexican Peso at 7-Month High

The Mexican peso has surged beyond 19.4 per USD, marking a seven-month peak as a significant retreat in the USD facilitated its recovery. The U.S. Consumer Price Index for April increased by merely 0.2% month-on-month and 2.3% year-on-year—its slowest rate since February 2021. This has prompted markets to predict two interest rate cuts by the Federal Reserve before the year's end, thus narrowing the dollar’s yield advantage. Concurrently, Banco de México is anticipated to announce its seventh consecutive 50-basis-point rate reduction on Thursday, aligning the policy differential more closely—though much of this has already been accounted for in the market. Domestically, a 1.9% year-on-year growth in March industrial production and a slight 0.2% GDP growth in the first quarter highlight the economy’s robustness. Additionally, strong oil and agricultural exports continue to bolster foreign exchange inflows. Despite ongoing U.S. tariffs on steel and automobiles and the forthcoming United States-Mexico-Canada Agreement (USMCA) review, the peso's ascent is indicative of the easing U.S. monetary influence combined with Mexico's strong economic underpinnings.