09.11.202612:53:01UTC+00Mexican Peso Supported by Hawkish Banxico Bets

The Mexican peso strengthened to 18.6 per USD from a 17‑month low of 18.86 on October 29th, as higher inflation bolstered expectations of a more hawkish stance from Banxico. Annual inflation accelerated to 3.75% from 3.45% in September, surpassing the 3.65% consensus forecast and moving further above Banxico’s 3% target. Core inflation inched up to 3.80% from 3.75%, largely in line with projections of 3.78%.

Persistently elevated inflation could push Banxico toward a more restrictive policy stance, supporting the peso by widening the interest rate differential with the US and enhancing the appeal of peso‑denominated carry trades. Nonetheless, at its latest meeting Banxico unexpectedly cut its benchmark rate to 6.25% and revised its forward guidance, indicating that rates are likely to remain at this new level for an “extended period.”

On the external front, Democratic gains in the US midterm elections may limit some of President Trump’s scope to pursue aggressive foreign trade measures, lending additional support to the peso. While USMCA‑compliant goods were exempt from Trump administration tariffs, additional duties remained in place on imports of steel, aluminum, and automobiles.