By Felipe Barragán, Expert Research Strategist at Pepperstone
September 12, 2025:
“The MXN spent the session trading more on global macro than on Mexico-specific headlines. After a soft one-two from U.S. inflation—producer prices fell yesterday and today’s CPI kept alive the “Fed cuts soon” story—the dollar lost some of its early bid and U.S. yields edged back, a backdrop that typically supports high-carry FX like the peso. Markets still lean toward a Fed cut next week, and the debate is more about “how fast” than “whether,” which keeps the dollar on the defensive and extends the carry tailwind across LatAm.
Domestically, the data pulse wasn’t flattering—INEGI reported that July industrial production fell 1.2% m/m and 2.7% y/y, underlining how uneven the manufacturing/construction complex has been into Q3. But with August headline inflation at 3.57%—close to target—Banxico can afford to move gradually without spooking the currency’s rate differential. The bank already slowed the pace of easing in August and has been explicit about needing more disinflation before larger cuts. Net-net, the growth wobble argues for caution, but the still-elevated real rate continues to anchor the peso.
Policy risk stayed in focus after Mexico’s government unveiled a plan to lift tariffs—including a proposed 50% levy on Chinese autos—as part of a broader overhaul. Near term, markets will parse inflation pass-through and any pushback from trading partners; medium term, the signal is that Mexico is prioritizing domestic industry and U.S. alignment ahead of next year’s USMCA review. For FX, the mix is two-handed: potentially firmer prices (a mild MXN headwind) versus an industrial policy that could reinforce near-shoring investment (a structural tailwind).
Across Latin America, the tone stayed broadly supportive for high-carry peers. Brazil’s real held firm with the BCB active in FX operations and a still-restrictive policy stance, while Andean FX continued to key off U.S. rates and commodities (oil for COP, copper for CLP). The regional narrative—carry plus improving global financial conditions—has been in place for weeks, though positioning is rich after a strong YTD run, which leaves currencies sensitive to any upside surprises in U.S. inflation or growth.
Overall today’s move fit the familiar template—global rates and the dollar drove the bus, while local data and policy headlines tweaked the story at the margin. If next week’s Fed meeting confirms an easing path and U.S. yields grind lower, the peso’s carry/risk-adjusted profile remains attractive. The two swing risks are (1) a sharper domestic growth downshift that forces Banxico to accelerate cuts, and (2) tariff-related inflation that narrows real rates or dents sentiment. Absent those, dips should still find buyers as long as global real yields drift down and near-shoring keeps Mexico’s medium-term story intact.”