FX.co ★ Mexican Peso Hits 8-Month High

The Mexican peso advanced toward 19.2 per USD, reaching its highest point in eight months, primarily due to a decline in the US dollar amid renewed trade tensions and shifts toward more dovish US monetary policies. President Trump's decision to increase steel and aluminum tariffs to 50 percent reignited trade tensions, prompting markets to lower their expectations for US economic growth. Mexico, having secured an exemption from these tariffs through effective diplomatic efforts, was able to protect its exporters and maintain strong trade flows. Simultaneously, weaker-than-anticipated US PCE inflation figures and a slowdown in job growth led the CME FedWatch Tool to almost certainly project that the Federal Reserve will hold its policy rate steady in its June meeting, exerting additional pressure on the US dollar without affecting Banco de México’s policy stance. Domestically, a slight rise in April’s unemployment rate to 2.5 percent, coupled with stable core inflation, supports Banxico’s decision to keep its policy rate unchanged, underscoring the peso’s robustness amidst these global challenges.