Quick overview

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The Mexican peso weakened and ended the week with a slight cumulative loss, as markets remained focused on developments in the Middle East conflict.

The currency depreciated sharply against the U.S. dollar in Friday’s session, reversing earlier gains and reflecting renewed risk aversion tied to geopolitical tensions and their potential economic impact.

The exchange rate closed at 17.9557 pesos per dollar, according to official data from Mexico’s central bank (Banxico). Compared to the previous close of 17.7396, this represented a decline of 21.61 centavos, or 1.22%.

The dollar traded within a range of 17.9963 at the high and 17.7092 at the low. Meanwhile, the U.S. Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, rose 0.34% to 99.54.

Oil concerns weigh on sentiment

Clashes involving the United States and Israel against Iran have impacted energy infrastructure in the Middle East. This, combined with Iran’s closure of the Strait of Hormuz, has created a complex backdrop that pushed WTI crude up 2.38% to $97.82.

Iraqi authorities also declared force majeure across all oil fields operated by foreign companies, meaning operations may be suspended or disrupted without contractual penalties due to circumstances beyond their control.

Focus on inflation and Banxico

This week, the Federal Reserve (Fed), the European Central Bank (ECB), and the Bank of England (BoE) all left interest rates unchanged, citing heightened uncertainty stemming from the conflict.

Attention now turns to Banxico, which is expected to announce its policy decision next week. Markets anticipate that it will also keep rates on hold. In addition, Mexico’s mid-month inflation data will be closely watched ahead of the announcement.

Weekly performance and outlook

Despite Friday’s decline, the peso posted only a marginal weekly loss. Compared to last Friday’s official close of 17.9489 per dollar, the currency slipped just 0.04%, according to Banxico data.

In the near term, markets are likely to remain highly volatile. Any signs of de-escalation in the conflict could trigger sharp rebounds, though these may prove difficult to sustain.