FX.co ★ Mexican Peso Hovers Around 18 USD

The Mexican peso remained close to 18 per US dollar, as the strengthening of the dollar overshadowed domestic factors that had supported the peso earlier this month. The recent increase in US weekly initial claims to 208,000, alongside a rise in continuing claims, amidst other mixed economic releases, has maintained the labor market's robustness. This scenario has reduced immediate expectations for Federal Reserve rate cuts, thereby increasing the opportunity cost of investing in emerging markets. Additionally, the Central Bank of Mexico's anticipated 25 basis point reduction to 7.00% in mid-December has lessened the interest rate differential advantage. Meanwhile, an improved inflation environment has prompted Banxico to indicate a cautious and data-dependent pause, rather than aggressively pursuing further rate cuts. Headline inflation decreased to 3.69% in December, and core inflation dropped to 4.33% in December 2025 from 4.43% in November, aligning closely with forecasts of about 4.34%. This decline in inflation has lessened immediate inflationary pressures and clarified the monetary policy outlook.