07.08.202519:50:36UTC+00Mexican Peso Halts Recovery After Banxico

The Mexican peso has depreciated beyond 18.6 per USD, reversing its previous recovery from a one-month low of 18.88 recorded on August 4th. This reversal occurred after the Bank of Mexico (Banxico) reduced its overnight interest rate to 7.75%, diminishing some of the carry trade attractiveness that supported the currency. This decision was influenced by a decline in annual inflation, which fell from 4.51% in mid-June to 3.51% in July, alongside slightly improved economic growth in the second quarter compared to the first, notwithstanding the ongoing underlying economic slack. The central bank expressed caution, highlighting global trade tensions and geopolitical risks as potential factors that could trigger inflation through peso devaluation, or act as threats to economic growth. Concurrently, the United States has imposed new tariffs, including a 25% levy on steel and 10% on aluminum imported from Mexico, with additional duties on auto parts expected next week. These measures introduce new challenges for export revenues and industrial production.