Mexican Peso Fundamental Analysis: Mexican Peso Stabilizes After Initial Pressure as the Dollar Gains Ground Globally

Despite the initial pullback, the Mexican currency showed a gradual intraday recovery, supported by hedging flows and a steady supply of dollars in the local market. FX traders noted that liquidity conditions have remained sufficient to absorb bouts of volatility, preventing disorderly moves or a sharper depreciation.

On the domestic front, Mexico’s inflation accelerated to 3.92% year-over-year in the first half of February, exceeding market expectations. Core inflation eased slightly to 4.52%, but also came in above consensus forecasts. This dynamic reinforces the perception that the disinflation process may face short-term obstacles, adding new considerations for monetary policy.

Persistent pressures in core components keep the debate open regarding the pace of future rate cuts by the central bank. Although headline inflation remains within the target range, the recent rebound could prompt a more cautious stance, particularly in a more complex international environment with rising external risks.

Internationally, the U.S. dollar index advanced 0.26% to 97.96 points, supported by the implementation of 10% global tariffs announced by President Donald Trump’s administration. The measure has fostered a more cautious tone in financial markets, strengthening the greenback as a relatively safe-haven asset against emerging market currencies.

However, the impact on Mexico has been partially contained, as several strategic products and goods covered under the USMCA were exempted from these tariffs. This differentiation has helped limit the deterioration of bilateral trade expectations and reduced the risk of a more severe exchange rate reaction.

Additionally, the peso continues to benefit from the interest rate differential versus the United States, which remains attractive for carry trade strategies. As long as real rates in Mexico stay in positive and comparatively elevated territory, the currency’s relative appeal persists, even during episodes of broad dollar strength.

Nevertheless, the environment is not risk-free. Recent episodes of violence in the country have generated some noise in market sentiment, adding to global uncertainty. While these factors have not triggered massive capital outflows, they have contributed to a more defensive tone among institutional investors.

In conclusion, the Mexican peso remains in a key technical and psychological zone around 17.30 per dollar, caught between external pressure from a stronger dollar and domestic support from ample liquidity and attractive yields. The trajectory of inflation, upcoming monetary policy decisions, and the real economic impact of the new U.S. tariffs will be decisive in determining whether the currency resumes its appreciation trend or consolidates at higher levels in the coming weeks.