USD/MXN breaks above 20.50 to highest since February 2017

• US Dollar gains momentum against EM market currencies: BRL and ZAR worst performers.
• USD/MXN continues to rally firm above 20.00, hit fresh 14-month highs.

The Mexican peso is falling sharply against the US dollar again, extending weekly losses to more than 3%. The USD/MXN pair broke above 20.50 for the first time since February of last year and climbed to 20.61.

During the last minutes, it pulled back and it was hovering around 20.55, consolidating strong daily gains. Yesterday’s recovery of the Mexican peso was short-lived.

The pair resumed the upside on the back of a stronger US dollar versus emerging market and commodity currencies. The South African Rand and the Brazilian  Real are the worst performers on Thursday.

Over the week, the peso and the real are down sharply. In Mexico, concerns about a failure on negotiations about NAFTA and the proximity of the presidential elections weigh on the peso. In Brazil, a truckers' strike paralyzed Brazil last week and its consequences continue.

Mexican inflation approaches target but still...

Today’s data showed that inflation in Mexico eased to the lowest in 17 months. The CPI for May came in at 4.51%, down from 4.55%. The number was above markets consensus (4.43%) but continues to point to the downside. Still, some analysts consider that the Bank of Mexico could raise rates at the next meeting after the depreciation of the peso.