FX.co ★ Mexican Peso Hits 7-Month High

In May 2025, the Mexican peso achieved its strongest level since the previous October, appreciating to 19.3 per USD, primarily due to heightened fiscal concerns and tariff uncertainties emanating from the United States, which caused a weakening of the US dollar. The dollar's decline against major global currencies followed the US House of Representatives' approval of legislation poised to expand the federal budget deficit by over $3 trillion, a move that occurred shortly after Moody's downgraded the US debt rating over unsustainable debt concerns. Domestically, recent data indicated a 0.2% growth in Mexico's GDP during the first quarter. Although this growth staved off a technical recession, it underscored a fundamental weakness in the Mexican economy and increased the urgency for the Bank of Mexico (Banxico) to reduce interest rates. Banxico, in its latest decision, as anticipated, cut rates by 50 basis points to 8.5%, aiming to reduce the allure of the Mexican carry trade.