Mexican Peso Retreats Amid Bets on Fewer Rate Cuts

The Mexican peso depreciated on Monday, pressured by the global strengthening of the U.S. dollar as markets prepared for the release of key U.S. inflation figures.

The exchange rate closed the session at 20.7235 pesos per dollar, compared to Friday’s official close of 20.7052, according to data from the Bank of Mexico (Banxico). This represents a loss of 1.83 cents, or 0.09%.

USD/MXN

During the session, the USD/MXN traded within a range, peaking at 20.8682 pesos and hitting a low of 20.6797. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against six major currencies, rose 0.18% to 109.85.

Relevant Data and Fewer Fed Cuts

Investors are closely watching Tuesday’s U.S. Producer Price Index (PPI) release, followed by the critical Consumer Price Index (CPI) on Wednesday. Ahead of these reports, the yield on 10-year U.S. Treasury bonds climbed.

Recent data from the U.S. service sector and labor market have bolstered expectations that the Federal Reserve (Fed) may face greater challenges in cutting interest rates this year. Higher-than-expected inflation figures could further dampen hopes for rate reductions, with markets currently pricing in only one Fed rate cut for 2025.

Mexican Peso Outlook

Additionally, investors are monitoring statements from U.S. President-elect Donald Trump, whose policy plans, including the implementation of broad tariffs, have fueled inflation concerns.

The exchange rate remains under pressure within a range of 20.70 to 20.87 pesos per dollar. A breach of the 21.00 threshold appears increasingly likely, particularly with Trump’s impending return to the presidency on January 20.

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ABOUT THE AUTHOR See More
Ignacio Teson
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
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