Recent developments in the currency market have led to a decline in the USD to MXN exchange rate, with the peso strengthening significantly against the dollar. Currently, the USD/MXN is hovering around 17.91, marking a 90-day low and sitting approximately 2.3% below its three-month average of 18.33. This decline reflects a stable trading range between 17.91 and 18.69 over recent weeks.
The US dollar has faced downward pressure, particularly influenced by the recent consumer price index report showing inflation easing from 3% to 2.7%, which has fueled expectations for aggressive rate cuts by the Federal Reserve in 2026. Analysts note that this dovish outlook is narrowing interest-rate differentials, leading to reduced demand for USD. As highlighted by various experts, a soft inflation print is likely to accelerate these rate cut expectations, resulting in further weakening of the dollar.
On the other hand, the Mexican peso has been buoyed by domestic factors. Recent data indicates that the MXN has appreciated to its strongest position since July 2024, driven by Mexico's own high benchmark interest rates and the Bank of Mexico's proactive stance in cutting rates from 10% to 7.75% to stimulate growth. Economic analysts have pointed out that the protections afforded by tariff exemptions on U.S. imports and the nearshoring trend, which bolsters exports as U.S. companies relocate production to Mexico, have strengthened the peso's outlook.
Overall, while the USD is likely to remain under pressure due to forecasts of imminent rate cuts and mixed economic data, the MXN is expected to continue benefiting from favorable domestic conditions. This dynamic suggests a cautious approach for businesses and individuals engaging in international transactions, with the potential for further peso appreciation against the dollar in the coming months.
