The Mexican peso recently reversed some of its five-week advance against the US dollar after the United States announced sanctions targeting Iran’s oil exports, increasing geopolitical concerns and demand for safe-haven assets. The peso had strengthened to around 16.95 per dollar, supported by broad US-dollar weakness, expectations for the Federal Reserve’s monetary-policy path, a wide interest-rate differential, the Bank of Mexico’s 6.50% target rate and steady capital inflows into Mexican assets. The latest risk-off move overshadowed Mexican inflation data showing headline inflation slowed to [X]% in [month] from [previous figure]%, slightly below expectations of [Y]%, while core inflation remained sticky at [Z]%. The cooling headline reading gives Banxico more room to consider rate cuts later this year, although officials have stressed the need for sustained evidence that inflation is moving toward its 3% target. Mexico’s annual core inflation rate had also eased to 3.93% in the first two weeks of August 2026, its lowest level since the first half of April 2025. The sanctions could benefit Mexico’s oil exports if global prices rise, but broader risk aversion may trigger capital outflows and weigh on the peso. Mexico may remain in a relatively stronger trade position with the US as the US-Canada trade war escalates.