USD/MXN drops toward 2017 lows after Mexican inflation hits highest in 7 years

The Mexican peso is among the best performers in the currency market on Friday. Recently printed fresh highest after the release of the March inflation report. 

The USD/MXN peaked during the Asian session at 18.87 on a risk aversion environment that followed the US air strike in Syria. Then it pulled back and during the American session dropped toward 18.60. 

Recently it bottomed at 18.64, the lowest since March 30. The pair remains near 18.61, where 2017 lows are located. 

CPI at 7-year highs 

The annual rate of inflation in Mexico reached the highest level since July 2009. The Consumer Price Index, rose 5.35% in March compared to a year ago, in line with market consensus. An increase in the prices of fruits and vegetables added to January’s surge in gasoline prices. During March the CPI rose 0.61% and the core index 0.57% (4.48% annual). 

The data came as expected. The next meeting of the Bank of Mexico will be in May. The evolution of prices during the next month could be relevant for the decision of whether to continue with the tightening cycle or pause it. The appreciation of the Mexican peso (up 10% against the USD so far during 2017) eased the pressure on the central bank to raise rates at a faster pace.