Mexican PesoQuote - Chart - Historical Data - News

The Mexican peso traded near 17.3 per USD in late May as markets monitored developments in peace negotiations between the US and Iran while digesting key domestic economic data. With Pakistan acting as mediator, the US and Iran moved somewhat closer to a potential agreement to end the conflict, although disagreements over Tehran’s uranium stockpiles and control of the Strait of Hormuz continued to prevent a final deal. Domestically, investors assessed revised GDP data showing Mexico’s economy contracted 0.6% quarter-on-quarter in Q1 while expanding just 0.2% from a year earlier. Inflation also slowed more than expected in the first half of May, though it remained above the central bank’s target, with annual CPI easing to 4.1%. The developments followed Moody’s downgrade of Mexico’s sovereign rating to “Baa3,” the lowest investment-grade level, and S&P Global Ratings’ decision to revise the outlook on the country’s “BBB” rating to negative.

The Mexican peso weakened to 17.3 per USD in mid-May as rising energy-driven inflation pressures fueled expectations that the Federal Reserve could raise interest rates later this year. The stronger US dollar coincided with higher US Treasury yields, adding pressure on emerging market currencies. Earlier in the month, the Bank of Mexico lowered its benchmark interest rate by 25 basis points to 6.5%, but signaled that the easing cycle that began in March 2024 had likely ended. Banxico adopted a more cautious stance as elevated energy prices linked to the Middle East conflict threatened to lift inflation expectations in Mexico. Meanwhile, the latest GDP data showed the Mexican economy contracted 0.8% in the first quarter, a steeper decline than markets had expected.

The Mexican peso rose to 17.2 in May, approaching the strongest in two years after the Bank of Mexico stated that it was done with its interest-rate cutting cycle. The central bank reduced its benchmark policy rate by 25bps to 6.5% in a narrow decision, compared to expectations of more consensus for a cut, but signaled that it concluded the easing cycle that began in March of 2024. Banxico delivered the clear statement as elevated energy prices due to the war in the Middle East threaten inflation expectations in the Mexican economy. This supported the continuation of the peso carry trade, supporting the currency despite downside risks to growth. The last GDP data pointed to a sharper contraction than expected of 0.8% in Q1.