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Mexican Peso Strengthens Against the Dollar Ahead of Inflation Data

Ignacio Teson•Friday, February 7, 2025•2 min read

The Mexican peso appreciated in Thursday’s trading session as the market gradually adjusts to the trade landscape under Donald Trump.

However, the currency pared its gains after the widely expected 50-basis-point interest rate cut was confirmed.

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The exchange rate closed at 20.4612 pesos per dollar, improving from 20.5560 pesos in the previous session, according to official data from the Bank of Mexico (Banxico). This represents a gain of 9.48 centavos, or 0.46%, for the peso. Throughout the day, the dollar traded between a high of 20.6550 and a low of 20.4164. Meanwhile, the U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 0.07% to 107.70 points.

USD/MXN

The peso remains in a consolidation phase, fluctuating around the 20.50 level within a congestion zone. The broader trading range is between 20.90 and 20.10, with no clear trend emerging.

Interest Rate Cut and Inflation Expectations

Banxico cut its benchmark interest rate by 50 basis points, bringing it down to 9.50%. This marks an acceleration in rate reductions after five 25-basis-point cuts last year, driven by lower inflation and recent economic contraction.

During mid-session, traders moderated an initial rebound in the U.S. dollar, which had been gaining after a period of weakness. The peso initially lost ground but later recovered, though its advance slowed following the confirmation of the rate cut.

The reduction in rates diminishes the appeal of Mexican debt, lowering demand for local assets and making carry trade positions less attractive. Investors are now focused on Mexico’s January inflation report, set to be released tomorrow.

U.S. Data

Meanwhile, the latest U.S. jobless claims report showed a moderate increase in new unemployment benefit applications last week. This comes ahead of Friday’s release of the nonfarm payrolls report, a key labor market indicator.

With the Federal Reserve closely monitoring inflation and economic activity, market attention remains on upcoming employment data and developments in the ongoing U.S.-China trade tensions.

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ABOUT THE AUTHOR See More
Ignacio Teson
Ignacio Teson
Economist and Financial Analyst
Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.
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