February 2025: the Mexican peso (MXN) has faced significant depreciation, primarily due to recent geopolitical developments. The U.S. government’s imposition of a 25% tariff on Mexican imports has led to a 2% decline in the peso against the U.S. dollar, pushing the exchange rate above 21 MXN per USD.

Key Factors Influencing the Peso:

1. Trade Tensions: The newly announced U.S. tariffs have heightened concerns about North American trade relations, particularly regarding the future of the United States-Mexico-Canada Agreement (USMCA). Analysts warn that if these tariffs persist, the peso could weaken further, potentially reaching 24 MXN per USD.
2. Economic Implications: The depreciation of the peso is expected to adversely affect Mexico’s exports, foreign investment, formal employment, and overall economic growth. The timing of this decline coincides with low trading volumes due to the upcoming Constitution Day holiday in Mexico, during which the Mexican Stock Exchange will remain closed.

Outlook for February 2025:

Given the current volatility, the peso is anticipated to remain under pressure throughout the month. Market participants should closely monitor developments in U.S.-Mexico trade relations and any potential retaliatory measures from the Mexican government. Additionally, upcoming economic indicators, such as inflation rates and employment data, will be crucial in assessing the peso’s trajectory.

In this uncertain environment, investors are advised to exercise caution and stay informed about policy changes and economic data releases that could impact the peso’s value.