The Mexican peso depreciated beyond 17.9 per US dollar after the Bank of Mexico unexpectedly resumed its easing cycle, cutting the benchmark rate by 25 basis points to 6.75%. The move, approved by a majority of the board, came despite a mid-March acceleration in headline inflation to 4.63% and was largely attributed to pronounced weakness in domestic economic activity in early 2026. Global factors also weighed on the peso, as the dollar strengthened following President Trump’s refusal to commit to a Middle East peace agreement, which heightened stagflation concerns and pushed US Treasury yields higher. With Iran showing little willingness to compromise and US strikes on energy infrastructure resuming, the ongoing risk of oil supply disruptions has continued to support the greenback. Domestically, a contraction in manufacturing output and narrowing interest rate differentials have further undermined the peso’s attractiveness.