Analysts have projected that the Fed will cut its key interest rate next week in hopes of boosting the faltering U.S. job market, raising concerns that lower borrowing costs could stoke inflation. The newspaper El Economista reported that the dollar’s decline comes as traders assess data from the U.S. Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation benchmark, which rose 0.3% in line with expectations.

Financial markets were said to be pricing in an 87% chance the Fed would reduce its key interest rate by a quarter-point, which would be its third rate cut in as many meetings. Felipe Mendoza, CEO of IMB Capital Qants, told El Financiero that the appreciation of Mexico’s currency on Thursday indicates that “despite global volatility and geopolitical noise, the structural support of the peso remains in place thanks to an attractive carry, the expectation of a Fed cut … and domestic financial stability.”

An “attractive carry” refers to an investment (like a bond or currency) that offers a high, steady income stream (also referred to as “the carry”) relative to its cost, allowing investors to profit just from holding the asset as time passes. The Mexican peso has appreciated 12.7% against the U.S. dollar so far in 2025, but analysts are already turning their attention to 2026 when Fed chairman Jerome Powell will step down in May.