Puerto Vallarta, Mexico – The peso dollar exchange rate dipped to 19.25 on June 3, 2025, after the OECD trimmed Mexico’s growth outlook to 0.4% and warned of tariff risks, prompting market jitters.
The Mexican peso gave up recent gains and traded at 19.25 per U.S. dollar on Tuesday, June 3, after the Organisation for Economic Co-operation and Development (OECD) cut Mexico’s 2025 growth forecast to 0.4% and flagged potential risks from U.S. tariffs. That marked a 0.22 percent drop for the peso compared with Monday’s close, reflecting renewed market caution over Mexico’s near-term economic outlook.
Gabriela Siller, director of analysis at Grupo Base, pointed to global risk aversion as a key driver behind the peso’s slide. “Investors grew cautious after the OECD forecast showed weaker growth and cited possible slowdowns in the U.S. economy due to current trade policy,” Siller said. In her view, any hint that the U.S. might slow down—especially under looming tariff threats—could dampen appetite for emerging-market currencies like the peso.
Despite that caution, some data painted a mixed picture for both economies. In the U.S., job vacancies climbed higher than expected, and unemployment remained low—signals that the labor market still looks healthy. “The fact that vacancies jumped today is a positive sign,” noted Chris Zaccarelli of Northlight Asset Management. He added that, though economists worry tariffs could undercut business activity, the stronger-than-expected hiring numbers suggest companies aren’t yet feeling severe pressure.
At Banamex branches on Tuesday, the dollar traded at 19.76 pesos for customers looking to buy U.S. currency, while the bank paid 18.60 pesos for each dollar it purchased. Those figures mirrored a broader trend: the U.S. dollar index (DXY) rose 0.52 percent to 99.22 points, underscoring a modest uptick in greenback strength. By contrast, Bloomberg’s broad dollar gauge (BBDXY) slipped 0.40 percent to 1,213.59, showing some divergence among global currencies.
OECD’s Warning and Mexico’s Growth Outlook
The OECD’s June update trimmed Mexico’s GDP growth projection for this year to just 0.4 percent, down from earlier estimates around 1 percent. The organization warned that Mexico faces mounting risks from potential U.S. tariffs on goods ranging from steel to agricultural products. Those levies could squeeze sectors that rely on cross-border trade, compounding headwinds already in place from sluggish consumer demand and limited fiscal stimulus.
The OECD also highlighted Mexico’s need to pursue deeper structural reforms, especially in energy and education, to boost productivity. As it stands, the modest growth outlook lags behind the nearly 2 percent expansion the Mexican central bank projects. Officials in Mexico City insist that strong domestic consumption and stable policy settings can help bridge that gap, but markets remain wary.
Market Reaction and Yield Gaps
Investors responded quickly to the downgrade. On Tuesday morning, the yield on the 10-year U.S. Treasury note held at 4.44 percent, while Mexico’s 10-year bond yield stayed near 9.35 percent. That roughly 5 percentage-point yield spread still offers a compelling carry advantage to foreign holders of peso-denominated debt, but it could narrow if Mexico’s economic data deteriorate further.
Foreign portfolio inflows have supported Mexico’s fixed-income market in recent months, but traders caution that any signs of fiscal slippage or weaker growth could trigger a sell-off. “Investors are watching fiscal discipline closely,” said Ana María Cárdenas, a fixed-income strategist at Citibanamex. “If government revenues miss targets and public debt rises, that carry trade advantage could evaporate fast.”
Tariffs, Trade, and Risk Appetite
Much of the peso’s volatility ties back to uncertainty over U.S. trade policy under the current administration. Although some sectors—like electronics and autos—benefit from near-shoring trends, others worry that new tariffs could stifle exports. Mexico depends on the U.S. as its largest trading partner, with 80 percent of its exports heading north of the border last year.
“Any talk of higher tariffs makes investors rethink exposure to Mexico,” said Siller. She noted that while manufacturers have diversified some supply chains, many smaller exporters still rely heavily on cross-border shipments. “If tariffs hit harder, those companies could see profits dry up, and that would weigh on the peso.”
For now, however, consumer sentiment in Mexico remains relatively stable. Household spending showed resilience in recent data, and remittances from abroad continue to bolster disposable income. Still, slower global growth could erode demand over the coming quarters, especially if the U.S. economy hits a soft patch later this year.
Outlook and Central Bank Stance
Mexico’s central bank has held its overnight policy rate at 11 percent since early March, citing inflation stability and tepid growth. Even after the peso weakened, officials said they saw no immediate reason to adjust rates. They expect inflation to hover near target by year-end, supported by tight monetary policy and subdued oil prices.
“The Banxico board believes current settings are appropriate to balance risks,” economist Julio López of Vector Casa de Bolsa said. “They’ve signaled patience and vigilance against upside surprises in inflation. Unless the peso slides more dramatically or inflation spikes, they’ll likely keep rates steady.”
Traders, however, factor in the possibility of an additional rate hold or even a cut if growth lags too far behind. Futures markets now price in roughly a 20 percent chance of a 25 basis-point cut by January 2026. For comparison, U.S. futures show a 50 percent chance of two rate cuts by the same period, reflecting diverging monetary paths that could further sway the peso-dollar exchange rate.
Investor Takeaways
– Peso Vulnerability: The peso remains sensitive to global risk sentiment. Any fresh trade-policy tensions or weaker U.S. data could push it lower.
– Yield Advantage: Mexico’s high bond yields still attract inflows, but that gap could close if credit spreads widen or the economy slows.
– Spot Rates: Keep an eye on commercial banks’ spreads between buy and sell rates. Banamex’s 19.76/18.60 spread on June 3 highlights the cost for retail flows.
– Central Bank Policy: Banxico’s commitment to keep rates at 11 percent bolsters the peso, but a prolonged growth slump might force a rethink later in 2025.
In short, while the peso’s recent slide reflects market nerves over weaker growth and tariff risks, some underlying strengths—like robust job markets and attractive yields—offer counterbalance. Traders will watch U.S. economic data, the Fed’s stance, and any fresh policy signals from the Mexican central bank to gauge the peso’s next move.
Puerto Vallarta, Mexico - The peso dollar exchange rate dipped to 19.25 on June 3, 2025, after the OECD trimmed Mexico’s growth . . .
