The Mexican peso closed at 18.9930 per dollar on Tuesday, gaining 0.80% after a ceasefire was announced between Israel and Iran. Markets also await Banxico’s rate decision.
The Mexican peso posted gains on Tuesday, rallying against the U.S. dollar as global markets reacted positively to a ceasefire between Israel and Iran, announced by former U.S. President Donald Trump after nearly two weeks of escalating tensions.
The exchange rate closed at 18.9930 pesos per dollar, marking a daily gain of 15.23 cents, or 0.80%, compared to Monday’s close of 19.1453, according to data from the Bank of Mexico (Banxico).
During the session, the dollar fluctuated between a high of 19.0927 pesos and a low of 18.9828 pesos. Despite this range, the peso held firm, buoyed by easing geopolitical fears and expectations for domestic monetary policy changes.
The rally coincided with a 0.43% rise in the U.S. Dollar Index (DXY) to 97.97, which compares the dollar to a basket of major currencies. While the DXY’s upward move typically reflects dollar strength, the peso still managed to outperform, a sign of robust investor sentiment toward Mexican assets.
Ceasefire brings temporary relief
Trump’s announcement of a ceasefire in the Middle East—following 12 days of hostilities between Israel and Iran—calmed global nerves and offered a respite from what many feared would spiral into a broader conflict involving the United States.
“Financial markets are reacting positively to the cessation of hostilities,” said CIBanco in a note. “Although doubts arise about its compliance, operators remain alert to possible renewed tensions amid accusations of breaking the truce.”
According to analysts at Monex, the reduction in geopolitical risk appetite led to a softening of the dollar, creating favorable conditions for the peso and other emerging-market currencies.
Analysts eye key resistance and support levels
Local financial institutions see potential for further appreciation in the peso. In a market note, Banorte Analysis stated, “We expect the recovery bias to continue; a breach of the psychological level of 19 pesos will establish a more favorable signal. The support to be tested is located at 18.94 pesos. We locate resistance at 19.13 pesos.”
This suggests that if the peso remains below the 19 mark, traders may interpret it as a bullish signal. A move below 18.94 pesos would further strengthen that sentiment, while any reversal above 19.13 pesos could signal new resistance.
Fed Chair Powell cautions on U.S. rate direction
Investors also kept a close watch on Federal Reserve Chairman Jerome Powell, who appeared before Congress on Tuesday for the first of his two-day semiannual testimony.
Powell reiterated that the Fed needs more time to assess the impact of existing tariffs and other economic pressures. While the Fed held interest rates steady at its last meeting, market chatter has begun to tilt toward a potential rate cut in July, especially as some Fed officials signal openness to easing monetary policy.
The possibility of lower U.S. rates tends to support risk assets, including emerging market currencies like the peso, as investors seek higher returns elsewhere.
Banxico decision in focus amid modest inflation rebound
Back in Mexico, attention now turns to Banxico’s monetary policy announcement scheduled for Thursday, where the central bank is widely expected to announce a 50 basis point rate cut, lowering the benchmark interest rate to 8.00%.
This would mark the third consecutive cut of that size, as Banxico continues its easing cycle in response to slowing inflation and a sluggish domestic economy.
Fresh inflation data released Tuesday showed biweekly inflation at 4.51% year-on-year, a slight decline from the 4.62% recorded in the second half of May. The data, while showing a rebound in some areas, was not strong enough to deter expectations for a rate cut.
“Despite the rebound in certain price categories, inflation remains within the band that allows for continued monetary easing,” said a Banamex market note.
With geopolitical risk temporarily subdued and domestic interest rates on a downward path, the peso may continue to find favor with traders—especially if Banxico confirms its dovish stance on Thursday. However, the shadow of the Middle East conflict and uncertainty over U.S. rate policy means volatility could return quickly.
For now, the peso is holding its ground.
The Mexican peso closed at 18.9930 per dollar on Tuesday, gaining 0.80% after a ceasefire was announced between Israel and . . .
