Mexican Peso: Support from real rates and US talks – Commerzbank

Michael Pfister at Commerzbank highlights that the Mexican Peso has strengthened, with USD/MXN back below 17, helped by a weaker Dollar and Mexico’s strong performance among major currencies. He cites better-than-expected growth, smoother USMCA negotiations with the US, easing core inflation, and Banxico’s pause in rate cuts, which leaves real interest rates supportive for the Peso.

Peso benefits from growth, inflation trends

"Since the end of July, the Mexican peso has strengthened significantly against the US dollar, with USD/MXN now trading below 17 once again."

"Two factors have helped: the Mexican real economy appears to be performing significantly better again despite the conflict in Iran."

"Meanwhile, the USMCA negotiations are underway and have so far proceeded without any major issues, unlike the US's negotiations with Canada."

"In fact, month-on-month core inflation has been gradually moving towards the middle of the target band."

"As Banxico has now halted its rate cuts, real interest rates in Mexico are having a positive effect on the peso."