• Mexican Peso strengthens as USD/MXN declines below key support level after recent central bank rate announcements.
• Banxico's split decision to cut rates to 11.00% provides a nuanced outlook, contributing to the Peso's resilience.
• Mexico's economic performance shows contraction in January and high inflation data.
• Banxico underscores a data-dependent approach, aiming for a 3% inflation target by the second quarter of 2025.

The Mexican Peso stages a comeback on Friday against the US Dollar (USD) after both central banks, the Federal Reserve (Fed) and the Bank of Mexico (Banxico), decided to respectively hold and cut interest rates amid their separate disinflation evolutions. Nevertheless, the emerging market currency stood afloat, perhaps on the Banxico vote split, providing a more balanced tone at the Governing Council. The USD/MXN trades at 16.70, sliding 0.18%.

Economic data from Mexico revealed on Friday that the economy shrunk in January from December, while the mid-month inflation report rose above estimates on a monthly basis and in the 12 months to March.

Elsewhere, Banxico’s decision to lower interest rates was not felt by the USD/MXN exchange rate, although the interest rate differential between the Mexican Central Bank and the Fed contracted. Banxico’s Governing Council reduced the main reference rate to 11.00%, though they emphasized that it would be data-dependent in future monetary policy meetings.

The Bank of Mexico expressed that policy remains restrictive, that the disinflation process would continue, and expects to reach its goal of 3% in the second quarter of 2025.