• Mexican Peso stages a comeback, reversing earlier losses driven by brief escalation in Russia-Ukraine conflict.
• Banxico Governor Victoria Rodriguez Ceja indicates the potential for continued rate cuts.
• Mexico’s 2025 fiscal budget viewed as optimistic, based on growth targets of 2-3% amid concerns over public spending cuts.

The Mexican Peso advanced against the US Dollar during the North American session on Tuesday, yet it recovered some ground after the USD/MXN hit a daily high of 20.34 due to risk aversion. A brief escalation of the Russia-Ukraine conflict was the main reason that pushed the pair higher, yet the Mexican currency staged a comeback despite dovish rhetoric by Bank of Mexico (Banxico) Governor Victoria Rodriguez Ceja.

At the time of writing, the USD/MXN trades at 20.15, around seven-day lows. Earlier, headlines revealed that Russia had widened its doctrine for using nuclear weapons, though toned down its rhetoric as Foreign Minister Lavrov said, “Russia's position is that nuclear war won't happen.” This sparked the Peso’s rally, to the detriment of the Greenback, as traders seeking risk lifted US equities higher.

Banxico Governor Victoria Rodriguez Ceja told Reuters the central bank would continue to cut its benchmark rate. "Given the progress of disinflation, we believe that we can continue with the cuts to the reference rate, and in the following meetings, we will be assessing the inflationary outlook and making the corresponding decisions," said Rodriguez late on Monday.

On Friday, the Finance Ministry presented the 2025 fiscal budget. Regarding this, Gabriela Siller of Banco Base said, “It is extremely difficult to achieve GDP growth of between 2% and 3% in 2025, especially in the first year of administration and with cuts in public spending.”

The Ministry of Finance projects Gross Domestic Product (GDP) to reach 2% to 3%, though it has been qualified as optimistic by most analysts.