On Wednesday, President-elect Donald Trump shared that he reached an agreement with Mexico’s President Claudia Sheinbaum to curb migration through Mexico into the U.S., essentially sealing off the Southern Border, according to the New York Times.
"Just had a fantastic chat with the new President of Mexico, Claudia Sheinbaum Pardo," Trump announced on his Truth Social account.
Earlier this week, Trump disclosed his plans to implement a hefty 25% tariff on Mexican imports. This move aims to pressure Mexico into taking a stronger stance against illegal immigration and drug trafficking.
Market Reactions
As of the current market update, the USD/MXN exchange rate has dropped by 1.08% today, bringing the trading value to 20.39.
Mexican Peso FAQs
The Mexican Peso (MXN) stands out as the most popular currency to trade among Latin American currencies. Its valuation hinges on various factors, such as the performance of Mexico’s economy, the central bank’s policy, foreign investments streaming into the country, and the remittances sent by Mexicans living abroad—especially from the United States. Global dynamics also influence MXN. For instance, nearshoring—a trend where companies relocate their production and supply chains closer to domestic bases—boosts the Mexican Peso, given Mexico’s pivotal role as a manufacturing center in the Americas. Additionally, fluctuations in oil prices significantly impact the currency since Mexico is a major oil exporter.
Mexico’s central bank, known as Banxico, focuses on keeping inflation low and stable, ideally around a target of 3%, nestled within a 2% to 4% tolerance band. To achieve this, Banxico adjusts interest rates accordingly. If inflation spikes, the bank may hike rates to contain it, discouraging borrowing by making it costlier, which in turn cools down demand and economic activity. Typically, higher interest rates enhance the appeal of the Mexican Peso (MXN) to investors due to better yields, whereas lower rates tend to weaken it.
The publication of key macroeconomic data plays a vital role in gauging Mexico’s economic health and can sway the value of MXN. A robust economy characterized by swift growth, low unemployment, and high consumer confidence bolsters MXN. Not only does it draw foreign investments, but it might also influence Banxico to consider raising interest rates, especially if economic vitality coincides with rising inflation. Conversely, disappointing economic figures can lead to a depreciation of MXN.
Classified as an emerging-market currency, the Mexican Peso (MXN) flourishes during risk-on periods when investors are less worried about global market risks and more inclined toward investments with higher returns. However, during financial upheavals or periods of economic uncertainty, MXN often weakens as investors shift their preference to safer, more stable assets.
