10.11.202514:19:08UTC+00Mexican Peso Rebounds

The Mexican peso gained strength, crossing 18.4 against the US dollar due to a combination of factors that included softer inflation figures, clearer policy signals, and a weaker US dollar, thereby reducing selling pressure and inviting carry trade flows. In October, the headline Consumer Price Index (CPI) decreased to 3.57%, comfortably within the central bank's target range of 2% to 4%. Core inflation has also cooled to the low 4% range, minimizing immediate inflationary threats. Recently, Banxico lowered its policy rate by 25 basis points to 7.25%, aligning with expectations. However, its cautious and data-driven approach, along with a single dissenting vote from Jonathan Heath, indicated a gradual approach to easing, which mitigated potential sell-off risks for the peso. As the rate cut was largely anticipated, the immediate impact on yields was limited, focusing instead on decreasing policy uncertainty and adjusting risk premiums. Concurrently, the US dollar retracted from recent highs as progress in US budget negotiations and diminished fear around government shutdowns reduced the demand for safe-haven assets.