Mexican Peso Steady After Fed Decision

The Mexican peso held steady at 17.44 per USD in late July after the Federal Reserve left interest rates unchanged, a decision that weakened the US dollar as roughly one-third of investors had expected a rate hike. Mexico continued to benefit from a wide interest rate differential, with Banxico's policy rate at 6.50% versus the Fed's 3.50%-3.75% range, although further Fed tightening could narrow the peso's yield advantage. Investors also viewed Mexico's trade position favorably after the US announced new tariffs on imports from about 60 economies. Goods that comply with USMCA rules of origin will remain exempt from the new measures, preserving Mexico's preferential access to the US market. Meanwhile, Mexico's trade surplus widened to $4.09 billion in June from $0.51 billion a year earlier, well above forecasts of $2.28 billion.

The Mexican peso strengthened to around 17.48 per USD in late July from 17.52 earlier in the month as investors viewed Mexico's trade position with the US as relatively favorable. The US announced new tariffs ranging from 10% to 12.5% on imports from roughly 60 economies. For Mexico, imports that do not qualify for preferential treatment under the USMCA will face a 10% tariff, while goods that comply with the agreement's rules of origin will remain exempt, preserving the country's preferential access to the US market. Existing exemptions also remain in place for products already covered by sector-specific tariffs, including automobiles, steel, aluminum, and pharmaceuticals. Mexico was included among the countries subject to the minimum 10% tariff, while many economies without trade agreements will face 12.5% duties, preserving Mexico's competitive advantage over several export rivals. The peso also found support from a pullback in global energy prices.

The Mexican peso weakened to 17.52 per USD in July after reaching 17.40 earlier in the month, as escalating tensions in the Middle East fueled risk aversion across global financial markets. The escalation prompted investors to seek safe-haven assets such as the US dollar. Meanwhile, Mexico's industrial output contracted by more than expected in May, with weakness broad-based across sectors, adding pressure to the peso amid signs of a slowing economy. Oil prices also extended gains as tensions near the Strait of Hormuz intensified, fueling energy-driven inflation fears. In contrast, Mexico's annual inflation rate eased to 3.37% in June 2026 from 3.94% in May, the lowest reading since December 2020. The figure came in slightly below market expectations of 3.52% and remained within the Bank of Mexico's target tolerance range of one percentage point around 3%.