FX.co ★ Mexican Peso Hovers Near 10-Month Highs

The Mexican peso has appreciated past 18.90 against the U.S. dollar, marking its strongest point since August. This appreciation comes amid a widespread decline in the dollar and heightened expectations for hawkish actions from the Bank of Mexico. Despite escalating hostilities between Israel and Iran, traditional safe-haven demand was not triggered, which instead led the Dollar Index to hit a three-year low and sparked fresh anticipation of rate cuts by the Federal Reserve. Domestically, an unexpected increase in May’s inflation rate to 4.42% has prompted Bank of Mexico officials to advocate for a pause in their monetary easing cycle, contingent on forthcoming data, thereby reinforcing support for the peso's yield. Furthermore, advancements in discussions between the U.S. and Mexico concerning exemptions for steel and automotive tariffs have reduced the threat of punitive export duties, contributing to the stabilization of medium-term capital flows. However, these positive developments are counterbalanced by a 12.1% year-on-year drop in April remittances, the most significant decline since 2012, which decreases a crucial source of foreign exchange inflows.