Key Economic Indicators Support Banxico’s Potential Rate Cuts
The Mexican peso has appreciated against the dollar this Thursday, as traders react to local data showing a modest but positive GDP growth for Mexico in Q1 2025 and higher-than-expected inflation.
Current Exchange Rate
The spot exchange rate is currently at 19.3584 pesos per dollar, marking a gain of 1.32 centavos or 0.07% compared to the previous closing rate of 19.3716 pesos.
Dollar’s Movement
The dollar’s movement is range-bound between a high of 19.4603 pesos and a low of 19.3286 pesos. Meanwhile, the Dollar Index (DXY) from the Intercontinental Exchange, which measures the dollar against a basket of six reference currencies, is up by 0.25% to 99.86 units.
Crucial Local Data
According to the National Institute of Statistics and Geography (INEGI), Mexico’s economy expanded by 0.8% annually in Q1 2025, aligning with earlier estimates. Seasonally adjusted figures showed a 0.2% advance, preventing the economy from slipping into a technical recession.
Regarding inflation, INEGI reported that the Consumer Price Index (IPC) increased by 0.09% in the first half of May, significantly higher than market expectations (-0.13%). On an annual basis, inflation accelerated to 4.22%, exceeding the central bank’s target range.
Despite the rise in overall inflation, underlying inflation stood at 3.97%, within the Banxico’s target. This, along with the economy’s sluggish performance, supports the possibility of further rate cuts by the monetary authority, as hinted at a week ago.
U.S. Fiscal Plan Remains a Focus
Meanwhile, traders remain vigilant regarding U.S. fiscal matters as the House of Representatives approved President Donald Trump‘s controversial tax-cut and spending bill, which could potentially increase federal government debt.
The issue has been contentious, especially after Moody’s downgraded the sovereign debt rating of the United States on Friday, citing growing debt and adding to uncertainties surrounding the world’s largest economy.
In labor market news, the number of Americans filing new applications for unemployment benefits fell by 2,000 to 227,000 last week, indicating stable job growth in May.
Key Questions and Answers
- What is the current state of the Mexican economy? The Mexican economy grew by 0.8% annually in Q1 2025, with seasonally adjusted figures showing a 0.2% advance, preventing a technical recession.
- How does inflation look in Mexico? Inflation rose to 4.22% annually in Mexico, exceeding the central bank’s target range. However, underlying inflation remained at 3.97%, within the Banxico’s target.
- What is the impact of U.S. fiscal developments on the Mexican peso? Traders are cautious about U.S. fiscal matters, including President Trump’s tax-cut and spending bill that could increase federal government debt. Moody’s recent downgrade of the U.S. sovereign debt rating has added to uncertainties surrounding the world’s largest economy.
