Overview of the Mexican Peso’s Performance
The Mexican peso appreciated against the dollar during Thursday’s trading sessions. The local currency regained momentum as the market reacted to the progress of US President Donald Trump‘s controversial tax reform project and local economic figures.
The exchange rate closed the day at 19.3121 pesos per dollar, which was an improvement of 5.95 centavos (0.31%) compared to the previous day’s figure of 19.3716 pesos per dollar, according to official data from the Banco de México (Banxico).
US Tax Reform and Uncertainty
Investors remain jittery regarding President Trump’s proposed tax cut and spending reduction bill. After extensive debate, the plan was approved by the House of Representatives and is now awaiting analysis from the Senate before it can be passed.
Some analysts have warned in US media outlets that the project could potentially increase the country’s debt by $3 to $5 trillion. Concerns have grown, especially following a downgrade of the US sovereign debt rating announced by Moody’s on Friday.
Local Economic Indicators
On the local front, Mexico’s economy grew by 0.8% annually in the first quarter of 2025, according to final figures from the National Institute of Statistics and Geography (INEGI). This growth was in line with earlier estimates, with seasonally adjusted growth of 0.2%, narrowly avoiding a recession.
Regarding inflation, INEGI reported that during the first half of May, the IPC (Consumer Price Index) increased by 0.09%, significantly higher than market expectations (-0.13%). On an annual basis, inflation accelerated to 4.22%, exceeding the central bank’s target range.
Market Technicals
The Mexican peso reached its best level against the dollar since October on Tuesday, at 19.24 pesos per dollar. Since then, it has been hovering around the 19.30 support level, looking for information that could push it towards its next target of 19, aided by the dollar’s weakness in the market.
For now, investors are reinforcing their expectation that Banxico will continue to cut local interest rates, as hinted at during the previous week’s 50 basis points reduction. Meanwhile, attention remains on uncertainties surrounding the US government’s debt situation.
Key Questions and Answers
- Q: Why is the Mexican peso gaining strength against the dollar?
A: The Mexican peso appreciated due to local economic data showing growth and higher-than-expected inflation, as well as market reaction to the progress of US President Donald Trump’s controversial tax reform project and uncertainty surrounding the US government’s debt situation.
- Q: What are the concerns regarding President Trump’s tax reform project?
A: Investors are worried that the proposed tax cut and spending reduction bill could potentially increase the US debt by $3 to $5 trillion, as suggested by some analysts. These concerns have grown following a downgrade of the US sovereign debt rating by Moody’s.
- Q: How is Mexico’s economy performing according to recent data?
A: Mexico’s economy grew by 0.8% annually in the first quarter of 2025, with seasonally adjusted growth of 0.2%. This growth narrowly avoided a recession, according to data from INEGI.
- Q: What are the recent inflation figures in Mexico?
A: During the first half of May, the IPC (Consumer Price Index) increased by 0.09%, significantly higher than market expectations (-0.13%). Annual inflation accelerated to 4.22%, exceeding the central bank’s target range.
