Mexican Peso Falls as Core PCE Revives Hawkish Fed Bets

The Mexican peso weakened against the US dollar as core PCE inflation data reignited expectations of a hawkish Federal Reserve policy stance. As of press time, USD/MXN traded around 16.95644, after touching an intraday low of 16.92.

**Hawkish expectations weigh on peso**

The latest inflation report showed persistent price pressures, reviving market bets that the Fed may adopt a more aggressive tightening path. Traders now see a higher probability of another rate hike before year-end. This shift in expectations boosted the dollar, pressuring emerging-market currencies including the Mexican peso.

**Dollar strength drives FX direction**

Broad dollar strength was the main driver behind the peso's decline. Following the inflation data, hawkish Fed rhetoric fueled dollar buying. The peso fell 0.34% on Monday, giving back some of its recent gains. Analysts suggest USD/MXN could remain driven by US economic data and rate expectations until the Fed's policy path becomes clearer.

**Focus shifts to Mexico's domestic data**

Looking ahead, the next catalyst will be Mexico's own inflation figures. If local price pressures also prove sticky, it could support the Bank of Mexico maintaining elevated interest rates, potentially limiting further peso depreciation.