The Mexican peso appreciated 0.31% to close at 19.3121 per dollar on Thursday as markets responded to the legislative progress of President Trump’s tax bill and robust Q1 GDP and inflation figures from INEGI, reinforcing expectations of further Banxico rate cuts.
On Thursday, May 22, 2025, the Mexican peso resumed its appreciation trend against the U.S. dollar, closing at 19.3121 pesos per dollar. This represented an improvement of 5.95 cents, or 0.31%, compared to Wednesday’s record closing of 19.3716 pesos, according to official data from the Bank of Mexico (Banxico). Traders attributed the move to both international and domestic drivers, including the U.S. legislative outlook and fresh local economic data.
The intraday trading range for the dollar spanned from a low of 19.2895 to a high of 19.4603. Meanwhile, the U.S. dollar index (DXY), which measures the dollar against a basket of six major currencies, ticked up by 0.32% to 99.93 points. Despite the dollar’s slight uptick in global markets, the peso’s gains underscore a growing focus on U.S. fiscal policy and Mexico’s own economic resilience.
On the international front, investors are closely monitoring the fate of President Donald Trump’s tax and spending cut bill. After an often-controversial debate in the House of Representatives, the legislation was approved this week and now moves to the Senate for review. The plan has drawn criticism for its potential to add between $3 trillion and $5 trillion to U.S. debt, a concern amplified by Moody’s recent downgrade of U.S. sovereign debt on Friday.
“The market is jittery about the scale of U.S. fiscal expansion,” said one foreign exchange strategist. “Even a modest rise in Treasury issuance could pressure the dollar if growth prospects falter.” Such commentary reflects broader uncertainty over whether the U.S. can sustain large-scale tax cuts without undermining fiscal stability.
Locally, two sets of INEGI data released this week provided further context for market participants. First-quarter gross domestic product (GDP) grew 0.8% year-on-year, matching earlier provisional estimates. On a seasonally adjusted basis, the economy expanded 0.2%, thereby avoiding technical recession territory. Analysts welcomed the confirmation, viewing it as evidence of Mexico’s steady, if modest, growth trajectory in early 2025.
Inflation figures released alongside GDP painted a mixed picture. Consumer prices (CPI) rose 0.09% in the first half of May, significantly outpacing the market consensus of –0.13%. On an annual basis, inflation accelerated to 4.22%, exceeding Banxico’s target range of 2% to 4%. The uptick has reignited debate over whether the central bank will pause or continue its cycle of monetary easing.
In its May policy meeting, Banxico cut its benchmark interest rate by 50 basis points, signaling that further reductions may be on the table. Traders are now positioning for at least one more cut before the end of the second quarter, given the central bank’s explicit guidance that inflation remains on a downward path despite recent upticks.
Technically, the peso has been trading around the 19.30 support level since reaching its strongest point since October earlier this week at 19.24. “We’re seeing a consolidation phase,” noted a local money manager. “If the dollar weakens further in response to U.S. debt worries, we could test targets near 19.20 or below. Conversely, any surprise uptick in U.S. yields could push us back toward 19.40.”
Indeed, Friday’s trading environment will likely hinge on new U.S. data releases and any Senate developments on the tax bill. Market participants will also keep an eye on Mexico’s upcoming inflation reports for late May, as second-half figures could influence Banxico’s next policy decision.
Despite persistent concerns over inflation overruns, the overall tone among investors is cautiously optimistic for the peso in the near term. A combination of U.S. fiscal uncertainty, softer global risk sentiment, and strong domestic growth fundamentals has set the stage for continued volatility in the foreign exchange market.
