FX.co ★ Mexican Peso Hovers Around 19 USD

The Mexican peso is hovering around 19.0 per USD, slightly higher than its recent ten-month low of 18.886 per dollar. This movement reflects a combination of weaker dollar dynamics, following the Federal Reserve's decision to maintain interest rates, and subdued US economic data. However, the peso faces challenges from anticipated monetary easing by the Bank of Mexico and rising geopolitical tensions. The US dollar lost some ground after the Fed's announcement, which generally benefits emerging-market currencies such as the peso, especially amidst growing concerns about trade and Middle East conflicts. Despite this, expectations are mounting for a fourth consecutive 50 basis point rate cut by Banxico on June 26th, narrowing the yield differential between Mexico and the US and reducing the attractiveness of the peso's carry trade. Concurrently, oil prices have surged to their highest levels this year due to escalating tensions between Israel and Iran. While this increase in oil prices boosts Mexico's oil revenues, it also poses inflationary pressures that could limit Banxico's ability to ease monetary policy and may prompt investors to seek the security of US assets once more.