• The Mexican Peso reclaimed higher ground against the US Dollar on Thursday.
• The Greenback sold off after Retail Sales surged in the US.
• Markets still see a September Fed rate cut, but strong Retail Sales shed slowdown fears.

The Mexican Peso (MXN) climbed three-quarters of a percent against the US Dollar (USD) on Thursday after the Greenback broadly softened. US Retail Sales firmly eclipsed forecasts, causing investors to shrug off recent economic slowdown concerns. Rate markets pulled back on their bets of a double cut from the Federal Reserve (Fed) in September.

Mexico’s central bank (Banxico) is holding firm in its recent decision to cut interest rates from 11% to 10.75%, even as headline inflation figures rose to 5.57% in July. Citing a long-run slide in core inflation metrics and a broader slowdown looming over Mexico’s domestic economy, Banxico’s Deputy Governor Omar Mejia noted during an interview on Thursday that:

... a cut with a degree of restriction wasn’t just adequate, but opportune and efficient; to consider just one data point on the margin would mean renouncing a fair amount of information that... we must incorporate into our decisions.

Banxico’s measure of core inflation slowed to 4.05% in July, down from the previous month’s 4.13%. The Mexican central bank expects core inflation to reach its 3% target sometime in Q4 2025.