FX.co ★ Mexican Peso Retreats from July 2024 Highs

The Mexican peso has depreciated, crossing the threshold of 18.35 per US dollar, moving away from the peak it had reached in July 2024 on November 12th. This shift occurred as the rally driven by initial post-shutdown risk appetite began to subside, and market anticipations of a dovish stance from the Federal Reserve were reduced. Traders are currently assigning approximately a 50% probability to a 25 basis point rate cut in December, down from nearly 65% earlier in the week. This adjustment follows comments from several Federal Reserve officials who questioned the necessity of further easing in light of the economy's resilience and persistent inflation uncertainties. Within Mexico, inflation has moderated, with the headline Consumer Price Index (CPI) at 3.57% in October and core inflation dropping to the low four-percent range. The 25 basis point interest rate cut by Banxico to 7.25% was accompanied by a cautious, data-dependent approach, indicating a preference for gradual easing rather than policy shocks, thereby reducing the likelihood of unexpected rate cuts.