FX.co ★ Mexican Peso Retreats from 10-Month Highs

The Mexican peso has edged closer to 19.1 per US dollar, retreating from its ten-month peak of 18.886 recorded on June 12th. This decline is attributed to the strengthening of the US dollar, expectations of monetary easing by Banco de México (Banxico), and renewed geopolitical tensions. In Washington, the Federal Reserve's decision to maintain interest rates at 4.25–4.50% along with Chair Powell’s caution that US tariffs could fuel inflation has increased the appeal of the dollar. Concurrently, the market is starting to anticipate sooner-than-expected rate reductions from Banxico, despite Mexico's current benchmark rate holding at 8.5%, which has diminished the carry trade advantage that previously buoyed the peso. Furthermore, fresh US trade tariff threats targeting significant Mexican exports have exacerbated economic uncertainties, eroding trust in the currency. Additionally, rising hostilities between Israel and Iran have pushed investors towards safe-haven assets, heightening demand for the dollar.