Mexican Peso Hits Near One-Year High
The Mexican peso strengthened to around 18.64 per US dollar in October, reaching its highest level in nearly a year. The currency appreciated following strong economic activity data, with the Global Indicator of Economic Activity rising 3.5% year over year through August, its strongest performance since September 2023. The exchange rate was also supported by expectations that Mexico and the US could reach a trade agreement, following comments by President Claudia Sheinbaum and US President Donald Trump indicating that the two countries were close to a deal. Meanwhile, annual mid-month inflation rose to 3.62% in October from 3.42% in September, slightly above forecasts of 3.60%. Persistent inflationary pressures could encourage a more hawkish stance by Banxico, while markets largely expect the US Federal Reserve to hold rates at its next meeting. A wider US-Mexico interest rate differential would strengthen the peso’s yield advantage and potentially encourage carry-trade inflows.
The Mexican peso strengthened to around 18.64 per US dollar in October, reaching its highest level in nearly a year. The currency appreciated following strong economic activity data, with the Global Indicator of Economic Activity rising 3.5% year over year through August, its strongest performance since September 2023. The exchange rate was also supported by expectations that Mexico and the US could reach a trade agreement, following comments by President Claudia Sheinbaum and US President Donald Trump indicating that the two countries were close to a deal.
Meanwhile, annual mid-month inflation rose to 3.62% in October from 3.42% in September, slightly above forecasts of 3.60%. Persistent inflationary pressures could encourage a more hawkish stance by Banxico, while markets largely expect the US Federal Reserve to hold rates at its next meeting. A wider US-Mexico interest rate differential would strengthen the peso’s yield advantage and potentially encourage carry-trade inflows.