FX.co ★ Mexican Peso Tests July-2024 Highs

The Mexican peso appreciated to approximately 17.91 per US dollar, reaching its strongest point since July 2024. This upward movement is attributed to the general weakening of the US dollar coupled with a cautious approach in domestic monetary policy. The recent decline in the US dollar is linked to growing concerns about the Federal Reserve's autonomy following reports of a Justice Department investigation into Chair Jerome Powell. Additionally, there are rising anticipations for further Fed rate cuts after December's nonfarm payroll figures fell short of expectations. In Mexico, after Banxico's anticipated 25 basis point reduction to 7.00% in December, the minutes revealed a reliance on data-driven decision-making. Although disinflation is progressing, it was noted that persistent underlying pressures, especially in core components, necessitate caution. Policymakers indicated no immediate need to hasten the easing process, communicating that future actions would be conditional rather than predetermined. This approach has helped stabilize forecasts following the initial narrowing of the interest rate differential.