The Mexican peso weakened past 20.7 per USD, approaching the over three-year low of 20.85 tested repeatedly since the start of the year after US President Donald Trump signaled that the US will impose tariffs on Mexico. While answering press questions over the signing of executive orders, the freshly-inaugurated President verbally signaled his administration is planning to impose tariffs of up to 25% on Mexico as of February 1st, citing the measures as reprimand for loose border control between both countries. Such policy would significantly impact the inflows of foreign exchange into Mexico from its biggest trading partner. The move also pressures the peso by removing a large source of demand for Mexican manufacturing, particularly in the auto sector, potentially forcing the Bank of Mexico to expedite rate cuts. Slowing investment, industrial output, and inflation in Mexico have already raised expectations of multiple rate cuts by Banxico this year.
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