The Bank of Mexico continued its rate cut cycle amid the pandemic, which prompted monetary and fiscal responses around the globe. The Mexican Central Bank cut its overnight rate to 5.00% from 5.50% as expected. That drove the U.S. Dollar/ Mexican Peso exchange rate higher as the news crossed the wires. In line with other central banks, the Bank of Mexico cited virus-induced worries in easing the bank's monetary stance. Inflation risks were cited as overall uncertain in the monetary policy statement, including to the downside "a greater than expected impact of widening the negative output gap" and to the upside, "additional episodes of foreign exchange depreciation." Annual headline inflation was noted rising to 3.17% from 2.15% during the second three months of the year. Still, Mexico's interest rate remains higher thank the majority of its emerging market peers.

The Bank of Mexico's statement also cited downgraded economic growth forecasts from multilateral organizations, including that from the International Monetary Fund. Despite the upside improvements seen as some economies reopen, the consiensus conveyed by the bank's statement is one of uncertainty and the bote to lower the overight rate was unanimous. Language of the statement leaves the door open to further rate cuts.

TD Ameritrade said it expected two more rate cuts in Mexico of 50 basis points followed by two more rate cuts of 25 basis points, which would leave Mexico's interest rate at 3.50%. The outlook in Brazil is also for a contracting economy, recentlyi forecast by thier central bank at 6.4%. Argentina is struggling with its debt restructuring.

According to Reuters, both the Mexican Peso and the Brazilian Real have rebounded recently, but said the Real has "more legs" than the Peso. The Peso is "running out of steam" while the Real is gaining momentum. Both Latin American "heavywights" have had their currencies pressured this year as central banks slashed interest rates. Historically-deep recession lies on the horizon. Both currencies' banks have used monetary stimulus in hopes of a quick post-pandemic recovery.

Trump's actions and statements regarding further wall-building have been a factor in weakening the Peso.

Economic activity in Mexico shrank at a record 19.9% year over year in April.

The Bank of Mexico intervened in March to offer $2 billion of foreign exdhange hedges, its first intervension since 2017. The Bank sold U.S. Dollars on the FX market. This is considered not the most ideal form of intervention for Mexico because it reduces the country's international reserves. As recently as March, Mexico's interest rates were hovering around the 7% level.

Mexico's president, commonly known as "AMLO" because of his long name, said he will not step in to aid the corporate sector, making him almost unique among the world's leaders. This has not gone down well with investors. AMLO's reluctance to boost spending has drawn parallels with Brazil, where President Jair Bolsonaro has downplayed the pandemioc and failed to lead a nationwide response, triggering a negative market reaction.