FX.co ★ Mexican Peso Eases from July 2024 Highs

The Mexican peso has recently depreciated to approximately 18.35 against the US dollar, retreating from its peak level of 18.29 recorded on September 16th, which was the strongest since July 2024. This decline in the peso is largely attributed to the US dollar gaining momentum following the Federal Reserve's monetary policy announcement. The anticipation of long-term interest rate cuts by the Fed has diminished, impacting the carry trade advantage previously enjoyed. In Mexico, headline inflation in August stood at around 3.57%, with core inflation at approximately 4.23%. Although these figures are relatively stable, they continue to prompt caution from Banxico, thereby restraining significant interest rate reductions. Economic growth projections have also become more conservative, with signs of contraction in industrial production and tempered expectations for private consumption. These factors have collectively led to a decreased demand for assets denominated in pesos. Additionally, external influences, such as heightened US treasury yields and a corrective phase following the rapid appreciation of the Mexican peso, have further contributed to its depreciation.