The Mexican central bank’s (Banxico) unchanged approach constitutes the foundation for the continued Peso strength around 17.00 in USD/MXN. 

As expected, Banxico left its key rate unchanged at 11.25% and continued to point out the upside risks for inflation. That makes it clear that it wants to avoid any speculation about the start of rate cuts in view of a significant fall in inflation to 4.8% recently (core inflation at 6.5%). Instead, it underlined in its statement that it is necessary to keep the key rate at the current levels for a prolonged period of time. 

We continue to see a chance for a first rate cut at the end of the year. The expected fall in inflation will continue to improve real interest rates until then, which fundamentally supports the MXN's strength.