Mexican Peso Falls Further After Trump’s Tariff Move

At mid-session, markets reacted to Banxico’s anticipated interest rate cut and its warning that trade policies could impact inflation expectations.

The Mexican peso depreciated against the dollar in Thursday’s trading, extending losses from the previous session after U.S. President Donald Trump announced auto tariffs and issued fresh threats.

The exchange rate closed at 20.3044 pesos per dollar, down from the official close of 20.1370, marking a 0.83% loss (16.74 centavos). The dollar traded between 20.3693 and 20.1251 pesos. Meanwhile, the Dollar Index (DXY), which measures the greenback against six major currencies, fell 0.25% to 104.29 points.

Tariff Tensions Mount

Trump announced a 25% tariff on automobiles starting Wednesday, April 2, though vehicles meeting USMCA content requirements would be exempt. He also threatened additional tariffs on Canada and the EU if they coordinated retaliatory measures.

The euro rose against the peso to 21.9183 from 21.6899, a 1.05% gain.

Banxico’s Rate Cut

Banxico confirmed a widely expected 50-basis-point rate cut, bringing its benchmark rate to 9%. It maintained its inflation forecast, projecting inflation will reach its target by Q3 2026.

Inflation remains near its historical average but still above the 3% target. In this context, the new interest rate level is relatively high considering current and expected inflation levels.

However, Banxico emphasized that its forecasts face risks, including currency depreciation, disruptions from geopolitical conflicts or trade policies, persistent core inflation, and potential cost pressures.

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.