The Mexican peso strengthened significantly on Wednesday, breaking below the 19 pesos per dollar mark for the first time in nearly a year. Trading at 18.92 to the dollar by mid-afternoon, the currency reached its strongest position since August 2024.
The peso’s appreciation comes amid growing speculation that the United States might soon exempt Mexican steel and aluminum from the recently imposed 50% tariffs. This potential relief follows President Trump’s doubling of tariffs on these Mexican imports just last week, after initially setting them at 25% in March.
Financial analysts attribute the peso’s rally to three key factors:
- Expectations that the U.S. Federal Reserve will cut interest rates while Mexico’s central bank may pause its own easing cycle;
- Optimism surrounding the recent trade agreement between the United States and China;
- Growing indications that U.S.-Mexico negotiations could lead to reduced steel tariffs up to certain import volumes.
The significant interest rate gap between Mexico (8.50%) and the United States (4.25%-4.5% range) continues to support the peso’s strength. Mexico’s inflation rate of 4.42% in May remains considerably higher than the U.S. rate of 2.4%.
Looking ahead, some financial analysts suggest the peso could potentially strengthen further to 18.50 per dollar if global market conditions remain favorable and tariff reductions materialize. However, Banamex offers a more conservative outlook, projecting the peso to weaken to 20.6 by December, citing potential tensions from the upcoming USMCA trade agreement review that could begin later this year.
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