05.09.202516:29:53UTC+00Mexican Peso Rebounds on USD Weakness

The Mexican peso advanced beyond 18.7 per USD as a significant weakening of the US dollar provided relief to the currency despite ongoing domestic economic growth challenges. The depreciation of the US dollar was influenced by poorer US payroll figures, which led to a decrease in short-term Treasury yields and diminished the dollar's attractiveness. On the home front, support for the peso was further strengthened by Banco de México's (Banxico) revised economic growth forecasts, raising the country's GDP projection to 0.6% for 2025 and 1.1% for 2026, thus indicating economic robustness. However, challenges remain, evidenced by a 4.7% decrease in remittances in July compared to the previous year—marking the fourth consecutive monthly decline and removing a key pillar of support for the peso. Additionally, the unemployment rate slightly increased to 2.8% from 2.7%, suggesting weaker consumer spending and underscoring the case for additional monetary easing. Banxico has initiated a cautious cycle of rate cuts, reducing rates by 25 basis points to 7.75% and adopting a restrained, data-driven approach, thereby reducing the peso's appeal for carry traders.