Mexican Peso Recovers After Banxico Rate Cut
The Mexican peso strengthened to around 18.6 per USD in November, recovering from a slump triggered by Banxico’s unexpected cut of its benchmark rate to 6.25%. The narrower rate differential with the US Federal Reserve reduces the appeal of peso-denominated carry trades, weighing on the currency. Banxico also revised its forward guidance, signaling that rates would remain at the new level for an “extended period.” The peso partially recovered after the post-decision move amid optimism over US-Mexico trade talks. Democrats won a majority of congressional seats in the US midterm elections; a Democratic majority could constrain some of President Trump’s trade policy decisions. While USMCA-compliant goods were exempted from Trump administration tariffs, additional tariffs remained on steel, aluminum and automotive imports.
The Mexican peso strengthened to around 18.6 per USD in November, recovering from a slump triggered by Banxico’s unexpected cut of its benchmark rate to 6.25%. The narrower rate differential with the US Federal Reserve reduces the appeal of peso-denominated carry trades, weighing on the currency. Banxico also revised its forward guidance, signaling that rates would remain at the new level for an “extended period.” The peso partially recovered after the post-decision move amid optimism over US-Mexico trade talks.
Democrats won a majority of congressional seats in the US midterm elections; a Democratic majority could constrain some of President Trump’s trade policy decisions. While USMCA-compliant goods were exempted from Trump administration tariffs, additional tariffs remained on steel, aluminum and automotive imports.