The Mexican peso weakened to around 18.47 per US dollar in October, testing its lowest level in 11 months, as the narrowing interest-rate differential between Mexico and the United States reduced the currency’s appeal. In the US, annual producer price inflation climbed to 6.3%, while consumer price inflation rose to 3.7%, reinforcing expectations that the Federal Reserve will raise interest rates this year.
Meanwhile, minutes from Banxico’s latest monetary policy meeting indicated that most members of the Governing Board believe that moderating core inflation and subdued domestic consumption create room to continue easing monetary policy into late 2026 and early 2027. Anticipation of a smaller interest-rate gap has bolstered demand for the US dollar by curbing expected capital inflows into Mexico, as Mexican yields become less attractive to foreign investors.
At the same time, expectations of record exports in 2026—driven by advances in artificial intelligence and continued industrial relocation—are providing some support for the peso.