Mexican Peso Weakens Amid Decline in Local Industrial Activity

The Mexican peso depreciated on Monday as the U.S. dollar strengthened, buoyed by a new trade agreement between the United States and China. Meanwhile, domestic data showing a contraction in Mexico’s industrial output added further pressure on the local currency. The exchange rate closed the session at 19.6039 pesos per dollar, compared to 19.4669 on Friday, according to official data from the Bank of Mexico (Banxico). This represents a loss of 13.70 centavos for the peso, equivalent to a 0.70% depreciation. Throughout the day, the dollar traded within a range of 19.4206 to 19.6659 pesos. The U.S. Dollar Index (DXY), which measures the greenback against a basket of six major currencies, rose 1.42% to 101.76 points. Weekend negotiations between the U.S. and China yielded strong results, with both sides agreeing to a 90-day pause on mutual tariffs. The deal includes a reduction of over 100 percentage points in tariffs—down to 30% and 10%, respectively. Markets had been awaiting clarity on the relationship between the world’s two largest economies. The agreement eased concerns about the U.S. economic outlook and boosted demand for dollar-denominated assets. U.S. President Donald Trump stated that China would be penalized via tariffs over its handling of fentanyl and added that negotiations with Europe have been more challenging—triggering a fresh wave of dollar buying. On the domestic front, the peso’s losses were exacerbated by a contraction in local industrial activity. According to Mexico’s statistics agency (INEGI), industrial output shrank by 0.9% month-over-month in March, though it rose 1.9% year-over-year. These figures come at the start of a week marked by significant economic events, including Banxico’s monetary policy decision on Thursday. Markets expect the central bank to continue lowering its benchmark interest rate amid signs of economic deceleration. Despite an uptick in April inflation, analysts project a 50 basis-point rate cut to 8.50%. While the peso ended the day with a moderate decline, analysts remain optimistic. Recent market behavior points to a potential appreciation trend, supported by improved global sentiment following the trade deal. Technical indicators suggest the exchange rate may be nearing a downward trend shift. For now, it remains range-bound between 19.50 and 19.65 pesos per dollar.