13.11.202514:32:08UTC+00Mexican Peso Appreciates to July 2024 Highs

The Mexican peso appreciated to surpass 18.3 against the US dollar, nearing its highest value since July 2024. This occurred amid decreasing inflation rates within Mexico and a cautious rate cut by Banxico. Simultaneously, the slowdown in US growth prospects and advancements in resolving the government shutdown contributed to the dollar's depreciation. In Mexico, inflation saw a decline, with the headline Consumer Price Index (CPI) falling to 3.57% in October, and core inflation dropping to the lower 4% range. Banxico implemented a modest 25 basis point reduction, setting the interest rate at 7.25%. The central bank's approach was prudent and data-driven, suggesting a gradual easing strategy rather than an abrupt policy shift, which minimized the odds of unexpected rate cuts. Concurrently, the softening US growth indicators and steps towards concluding the extended government shutdown reduced the extraordinary demand for dollars as a safe haven, redirecting investments towards higher-yield emerging market instruments. Given that the policy change was largely anticipated, its direct impact on yields was limited, with the prevailing influences being adjusted risk premiums and renewed interest in carry trade opportunities.