The Mexican peso weakened past 20.8 per U.S. dollar, nearing its March 2022 low of 20.85 seen December 31st, as investors braced for US President-elect Donald Trump’s inauguration. Speculation surrounding Trump’s policies, including potential tariffs and a tougher stance on immigration, has generated uncertainty, dampening the demand outlook for the peso. Domestically, Mexico's economic indicators have provided little support; although October’s Gross Fixed Investment showed a modest uptick, it remains well below past highs, signaling sluggish economic momentum. Meanwhile, despite Federal Reserve Governor Waller suggesting the possibility of more aggressive rate cuts, the Bank of Mexico is expected to reduce rates more swiftly by as much as 200 basis points in 2025, narrowing the interest rate differential and dampening the appeal of carry trades.
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