FX.co ★ Mexican Peso Pressured by Tariff Threats

The Mexican peso has weakened beyond 18.65 per USD, declining from its high levels in August 2024, primarily due to new U.S. tariff threats that have jeopardized key Mexican exports, strengthening the U.S. dollar. President Trump's announcement of a 50% tariff on copper—a market where Mexico is one of the leading global suppliers—along with implied threats of similar tariffs on pharmaceuticals and semiconductors, poses a significant risk to the country’s mining and manufacturing export revenues. Concurrently, minutes from the U.S. Federal Reserve indicated that while interest rate cuts may be considered later this year, there is ongoing concern about inflation driven by trade issues, which supports continued demand for the U.S. dollar. Nonetheless, the depreciation of the peso has been somewhat restrained by Banco de México's firm stance following a surprising increase in core inflation to 4.24% in June, the highest since April 2024, and solid external balances—evidenced by a trade surplus exceeding $9 billion from January to May, and record remittances of $5.7 billion in June.