The Mexican peso weakened on Thursday amid news of stalled negotiations between the United States and Iran. Investors grew uneasy over geopolitical uncertainties, leading to broad pressure on emerging market currencies.
The impasse in negotiations weighed on the peso. Reports indicated that the US and Iran failed to make progress on key issues, causing talks to stall. Meanwhile, news of a potential personnel change involving Iran's chief negotiator further heightened market concerns about the outlook for the discussions. As a result, safe-haven demand for the US dollar increased, while risk-sensitive currencies like the Mexican peso declined broadly.
Previously, the peso had received a boost after US President Donald Trump announced an indefinite extension of the US-Iran ceasefire agreement, trading near a six-month high. However, the lack of substantive progress in negotiations has eroded market optimism, causing the peso to surrender some of its gains.
In addition to geopolitical factors, Mexico's own economic outlook is also putting pressure on the peso. Market surveys suggest that, due to uncertainty surrounding the US-Mexico-Canada Agreement (USMCA), Mexico's economy is expected to grow below 2% for the third consecutive year. There is widespread anticipation that the average annual inflation rate will rise from 3.8% to 4.0% this year.
Nevertheless, recent data showed that inflation in Mexico slowed in the first half of April, with the overall inflation rate dropping to 4.53% and core inflation falling to 4.27%. This provides room for the Bank of Mexico to continue cutting interest rates.
In the stock market, Mexico's benchmark IPC index posted a slight gain. Shares of cement giant Cemex surged over 6% after the company reported record operating profits in its first-quarter earnings. Financial group Gentera also rose approximately 4%. Analysts noted that positive corporate earnings temporarily offset the drag from geopolitical concerns on the market.
Looking ahead, market participants suggest that the peso's movement in the short term will continue to be influenced by developments in the US-Iran negotiations. If the stalemate persists, the peso may test key support levels further. At the same time, investors are monitoring the joint review process for the USMCA, set to begin on July 1, as its outcome will significantly impact Mexico's trade prospects and the peso's trajectory.
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