FX.co ★ Mexican Peso Weakens to 7-Week Low

The Mexican peso has recently depreciated, reaching over 18.55 against the US dollar, marking its weakest level in nearly seven weeks. Contributing to this trend is a market perception that Banxico, Mexico's central bank, may adopt a more dovish approach, even as the US dollar experiences a resurgence. In the third quarter, Mexico's GDP decreased by 0.3% compared to the previous quarter, representing only the second quarterly decline since early 2021. This downturn can be attributed to a roughly 1.5% drop in industrial output due to US auto tariffs, stagnation in service sector activities, and an annual growth rate slowing to around 0.2%. The labor market has also shown signs of weakening, with September's unemployment rate climbing to 3.0%, the highest since August 2024, primarily affecting individuals in their prime working years. Notably, nearly half of the recently unemployed have been jobless for a month or less, suggesting a decline in hiring activities. Concurrently, comments from Fed Chair Powell indicating that a December interest rate cut is not a given have significantly reduced market expectations for further US monetary easing. This has strengthened the US dollar, exerting additional pressure on the peso.