• Mexican Peso erases previous gains on global geopolitical developments and dovish comments from Banxico’s Governor.
• Victoria Rodríguez Ceja’s dovish stance on continued rate cuts reflects efforts to manage inflation amidst economic challenges.
• Geopolitical risks remain heightened as military actions in Ukraine influence USD/MXN’s volatility.

The Mexican Peso erased some of Tuesday's gains versus the Greenback as geopolitical risks continued to drive the financial markets amid a possible escalation of the Russia-Ukraine conflict. Additionally, Bank of Mexico (Banxico) Governor Rodriguez's dovish remarks alongside the ongoing economic slowdown in Mexico hurt the prospects of the emerging market currency. At the time of writing, the USD/MXN trades at 20.30, up by 1%.

Bank of Mexico Governor Victoria Rodríguez Ceja indicated that the central bank plans to continue reducing its benchmark interest rate, citing progress in lowering inflation. Besides this, traders are eyeing the release of Mexican Retail Sales data for September on Thursday, followed by the release of the Gross Domestic Product (GDP) and mid-month inflation figures on Friday.

Meanwhile, some analysts hint that the Mexican economy will not grow within the 2% to 3% range in 2025 as expected by the Finance Ministry. Gabriela Siller of Banco Base said, “It is extremely difficult to achieve GDP growth […] especially in the first year of administration and with cuts in public spending.”