The Mexican peso strengthened to around 16.95 per US dollar after posting gains for five consecutive weeks. The sustained appreciation has been driven mainly by broad-based weakness in the US dollar in international markets, along with expectations regarding the Federal Reserve’s monetary policy path, which has supported a wide interest-rate differential. The Bank of Mexico has kept its target interest rate at 6.50%, a stance that, compared with those of other emerging economies, has provided important support for the local currency. Meanwhile, steady capital inflows into Mexican assets have also supported the currency. In addition, the escalation of the US-Canada trade war puts Mexico in a relatively better position in trade with the US. Mexico’s annual core inflation rate eased to 3.93% in the first two weeks of August 2026, the lowest since the first half of April 2025.