FX.co ★ Mexican Peso Eases from August Highs

The Mexican peso recently fell to 18.67 per USD after previously reaching a high of 18.63 in August 2024, marking this occurrence on July 4th. This shift came as the US dollar gained strength following President Trump’s announcement that reciprocal tariffs would commence on August 1st. Despite this, Mexico's external economic position remains strong. The January to May trade surplus increased to over $9 billion, with a $1.03 billion surplus recorded in May alone. Furthermore, June saw remittances reach an unprecedented $5.7 billion, bolstering foreign exchange reserves. In terms of policy, on June 26th, Banco de México reduced its benchmark rate by 50 basis points to 8%. However, the bank emphasized that further cuts are contingent upon clear signs of disinflation, thereby maintaining a substantial real yield advantage that supports demand for the peso. Domestically, the labor market and business activities continue to outperform their regional counterparts, with a low unemployment rate of 2.7%. Although June's Purchasing Managers' Index (PMI) slightly decreased to 46.3, it still remains higher than that of most Latin American countries.