USDMXN Analysis: December 25, 2023

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In December, the USDMXN surpassed the 17 per USD mark, achieving its highest value since late August. This was largely due to economic data and inflation rates exceeding expectations, leading to predictions of an extended hawkish stance by the Bank of Mexico. Mexico’s trade balance saw its largest surplus in nine months, and the economic activity in October exceeded estimates with a year-over-year increase of 4.2%, the highest in five months. Furthermore, in the first half of December, the annual headline inflation rose to 4.46%, up from 4.32% in the previous period, beating market forecasts of 4.36%.

At its most recent meeting, Banxico kept its benchmark policy rate at a record-high of 11.25%, lending support to the Mexican currency. The peso also benefited from the anticipated multiple rate cuts by the Federal Reserve next year, which weakened the dollar and boosted demand for emerging market currencies.

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