FX.co ★ Mexican Peso Strengthens to 11-Month Highs

The Mexican peso has climbed to over 18.6 per USD, marking its strongest level in eleven months, as investors contemplate the sustained price pressures amid strong external balances. Core inflation unexpectedly accelerated to 4.24% in June, the highest since April 2024. This has maintained market expectations that the Banco de México will cautiously decelerate rate cuts, ensuring a substantial real yield buffer even after reducing the policy rate by 50 basis points to 8% on June 26th. Meanwhile, healthy foreign-exchange inflows—bolstered by an expanding trade surplus of more than $9 billion from January to May, including a $1.03 billion surplus in May, along with record-high remittances of $5.7 billion in June—have strengthened the central bank's foreign exchange reserves. Internationally, the slight U.S. dollar rebound, prompted by renewed tariff threats, has been somewhat offset within Mexico due to progress in negotiations aimed at delaying or lessening reciprocal duties, thus providing vital respite for exporters.