The Mexican peso weakened beyond 17.2 per dollar, retreating from its mid‑2024 highs as new US protectionist trade measures and a deteriorating formal labor market eroded the currency’s yield advantage. The United States invoked Section 122 to impose a 15% global import surcharge, following a February 20 Supreme Court ruling that struck down earlier emergency tariffs.
Demand for the peso eased after January 2026 data showed a net loss of 8,100 formal jobs, marking the worst start to a year since 2014. Although the unemployment rate held at 2.7% in January 2026, business confidence remained in pessimistic territory for an eleventh consecutive month amid contracting manufacturing activity.
At the same time, the supply of pesos increased against a resilient US dollar, which was supported by hawkish signals from the Federal Reserve in the face of persistently high 3% core PCE inflation. Banxico kept its benchmark interest rate unchanged at 7% in February 2026 but cautioned that the new trade surcharges would delay the return to its 3% inflation target until mid‑2027.
